Question

Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,700 million on July 1, 2018, at a price of $1,680 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2018, if it uses the indirect method

Answer 1

Agee Technology, Inc.

Amounts related to the bonds to report in statement of cash flows for the year ended December 31, 2018:

1. Receipts from Bonds Issue = $1,680 million

2. Payment of Interests on Bonds = -$153 million

Step-by-step explanation:

a) The interests are based on based on 9% of $1,700 million, the bonds' face value.

b) The same amounts will be reported either using the direct method or the indirect method. The indirect method adjusts the net income with non-cash expenses instead of using the direct inflows and outflows from operating activities.