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On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that

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On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: Payment Cash Payment Effective Interest Increase in Balance Outstanding Balance 7,290,000 1 352,000 364,500 12,500 7,302,500 2 352,000 365,125 13,125 7,315,625 3 352,000 365,781 13,781 7,329,406 4 352,000 366,470 14,470 7,343,876 5 352,000 367,194 15,194 7,359,070 6 352,000 367,954 15,954 7,375,024 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 38 352,000 428,018 76,018 8,636,373 39 352,000 431,819 79,819 8,716,192 40 352,000 435,808 83,808 8,800,000 Required: 1.What is the face amount of the bonds? 2.What is the initial selling price of the bonds? 3.What is the term to maturity in years? 4.Interest is determined by what approach? 5. What is the stated annual interest rate? 6. What is the effective annual interest rate? 7. What is the total cash interest paid over the term to maturity? 8. What is the total effective interest expense recorded over the term to maturity?   Blanton Plastics, a household plastic product manufacturer, borrowed $28 million cash on October 1, 2018, to provide working capital for year-end production. Blanton issued a four-month, 12% promissory note to L&T Bank under a prearranged short-term line of credit. Interest on the note was payable at maturity. Each firm’s fiscal period is the calendar year. Required: 1. Prepare the journal entries to record (a) the issuance of the note by Blanton Plastics and (b) L&T Bank’s receivable on October 1, 2018. 2. Prepare the journal entries by both firms to record all subsequent events related to the note through January 31, 2019. 3. Suppose the face amount of the note was adjusted to include interest (a noninterest-bearing note) and 12% is the bank’s stated discount rate. (a) Prepare the journal entries to record the issuance of the noninterest-bearing note by Blanton Plastics on October 1, 2018, the adjusting entry at December 31, and payment of the note at maturity. (b) What would be the effective interest rate?

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