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Now give this answer completely without skipping even a small step of calculation and try not to give answer in long paragraphs and answer the questions by following these instructions: ?Solution should be in proper format. ?A complete answer starts with the problem's objective OR addition of available data/ information Or the right approach. ?Add all necessary steps/supporting explanations until the answer is complete. ?If there are any formulae, you should mention it. ?Write calculations in a format so it can be easily pasted in chegg equation render tool. ?Do not use Python or any code-based for calculations (Important). ?Double check the solution to accomplish the correct concept, explanation, and calculations before submitting. ✅ The Final Answer should be a simple and clear summary of the solution in lucid language. ✅ The Final Answer Step is to include the crux of the entire solution. ✅ The final answer step contains the result of the solution only in a clear & concise manner. ✅ The Final Answer should be a simple and clear summary of the solution in lucid language. ✅ Final Answer Step is to include the crux of the entire solution. ✅Final answer step contains the result of the solution only in clear & concise manner.| Eesgatek fot ond You are the new controller for Moonlight Bay Resorts. The company CFO has asked you to determine the company’s Interest expense for the year ended December 31, 2024. Your accounting group provided you the following Information on the company's debt Note: Use tables, Excel, or a financial calculator. (EV of $1, PV of $1, EVA'of $1, BVA of $1, VAD of §1 and PVAD of 41 666 points 1.On July 1, 2024, Moonlight Bay issued bonds with a face amount of $2,600,000. The bonds mature In 1 years and Interest of 1% is payable semiannually on June 30 and December 31. The bonds wee issued at a price to yield investors 125%. Moonlight Bay (sires records interest at the effective rate. 0 2. At December 31, 2023, Moonlight Bay had a 10% installment note payable to Third Mercantile Bank with a balance of $560,000 The annual payment is $90,000, payable each June 30. ye 3. On January 1, 2024, Moonlight Bay leased a building under a finance lease calling for four annual lease payments of $55,000. beginning January 1, 2024. Moonlight Bay's incremental borrowing rate on the date of the lease was 9% and the lessors Implicit Pane rate, which was known by Moonlight Bay, was 8% References | Required: Calculate Interest expense for the year ended December 31, 2024. Note: Round your answer to nearest whole dollar.

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Now give this answer completely without skipping even a small step of calculation and try not to give answer in long paragraphs and answer the questions by following these instructions: ?Solution should be in proper format. ?A complete answer starts with the problem's objective OR addition of available data/ information Or the right approach. ?Add all necessary steps/supporting explanations until the answer is complete. ?If there are any formulae, you should mention it. ?Write calculations in a format so it can be easily pasted in chegg equation render tool. ?Do not use Python or any code-based for calculations (Important). ?Double check the solution to accomplish the correct concept, explanation, and calculations before submitting. ✅ The Final Answer should be a simple and clear summary of the solution in lucid language. ✅ The Final Answer Step is to include the crux of the entire solution. ✅ The final answer step contains the result of the solution only in a clear & concise manner. ✅ The Final Answer should be a simple and clear summary of the solution in lucid language. ✅ Final Answer Step is to include the crux of the entire solution. ✅Final answer step contains the result of the solution only in clear & concise manner.Uploaded Image| Eesgatek fot ond You are the new controller for Moonlight Bay Resorts. The company CFO has asked you to determine the company’s Interest expense for the year ended December 31, 2024. Your accounting group provided you the following Information on the company's debt Note: Use tables, Excel, or a financial calculator. (EV of $1, PV of $1, EVA'of $1, BVA of $1, VAD of §1 and PVAD of 41 666 points 1.On July 1, 2024, Moonlight Bay issued bonds with a face amount of $2,600,000. The bonds mature In 1 years and Interest of 1% is payable semiannually on June 30 and December 31. The bonds wee issued at a price to yield investors 125%. Moonlight Bay (sires records interest at the effective rate. 0 2. At December 31, 2023, Moonlight Bay had a 10% installment note payable to Third Mercantile Bank with a balance of $560,000 The annual payment is $90,000, payable each June 30. ye 3. On January 1, 2024, Moonlight Bay leased a building under a finance lease calling for four annual lease payments of $55,000. beginning January 1, 2024. Moonlight Bay's incremental borrowing rate on the date of the lease was 9% and the lessors Implicit Pane rate, which was known by Moonlight Bay, was 8% References | Required: Calculate Interest expense for the year ended December 31, 2024. Note: Round your answer to nearest whole dollar.

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Asked by: PADMA
Created at: 2025-10-12 11:50:17

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# Problem Objective Calculate the **interest expense for Moonlight Bay Resorts for the year ended December 31, 2024** using the provided debt information. **Round your answer to the nearest whole dollar.** --- ## **Available** 1. **Bonds Issued:** - Issued on: July 1, 2024 - Face amount: \$2,600,000 - Maturity: 15 years - Coupon: 11% (payable semiannually: June 30 & Dec 31) - Issued at yield: 12% (effective rate, semiannual = 6%) - Issued at discount (since coupon < yield) 2. **Note Payable:** - Balance on Dec 31, 2023: \$560,000 - Interest rate: 10% - Annual payment: \$90,000 (payable each June 30) 3. **Finance Lease:** - Lease start: Jan 1, 2024 - Lease payments: \$55,000 (4 annual payments) - Borrowing rate: 9% - Lessor's implicit rate: 8% (use 8% since it is known to lessee) --- # **Step 1: Calculate Interest Expense for Each Debt** --- ## **A. Bonds (issued July 1, 2024)** ### **1. Calculate Issue Price of Bonds (using Present Value)** #### **i. Calculate Present Value of Interest Payments** - Semiannual coupon = 11% annual / 2 × \$2,600,000 = .055 × \$2,600,000 = **\$143,000** - Number of periods = 15 years × 2 = **30 periods** - Market (yield) rate period = 12% / 2 = **6%** - PV of Annuity (PVA) = \$143,000 × PVA(6%, 30) #### **ii. Calculate Present Value of Principal** - PV of \$1 (30 periods, 6%) = PVF(6%, 30) - PV of Principal = \$2,600,000 × PVF(6%, 30) #### **iii. Find Factors from Table** - PVF (6%, 30) = .1741 - PVA (6%, 30) = 13.7648 #### **iv. Calculate Issue Price** \[ \text{PV of Interest} = \$143,000 \times 13.7648 = \$1,967,382.4 \] \[ \text{PV of Principal} = \$2,600,000 \times .1741 = \$452,660 \] \[ \text{Total Issue Price} = \$1,967,382.4 + \$452,660 = \$2,420,042.4 \] --- ### **2. Calculate Interest Expense for 2024 (only one period, July 1 to Dec 31)** - **Carrying value at issuance:** \$2,420,042 - **Effective (market) rate per period:** 6% - **Interest expense (6 months):** \[ \text{Interest Expense} = \$2,420,042 \times .06 = \$145,202.52 \] --- ## **B. Note Payable (\$560,000 at 10%)** - **Interest for 2024:** \[ \text{Interest Expense} = \$560,000 \times .10 = \$56,000 \] --- ## **C. Finance Lease (\$55,000 × 4, 8% implicit rate)** ### **1. Calculate Present Value of Lease Payments (Lease Liability at Start)** - Number of payments: 4 - Rate: 8% - PV of Ordinary Annuity (PVAD) for 4 years, 8%: PVAD(8%, 4) = 3.31213 - **Present Value:** \[ \text{PV} = \$55,000 \times 3.31213 = \$182,167.15 \] ### **2. Interest Expense for 2024 (first year)** - **Interest for 2024:** \[ \text{Interest Expense} = \$182,167.15 \times .08 = \$14,573.37 \] --- # **Step 2: Sum All Interest Expenses** \[ \text{Total Interest Expense} = \$145,203 + \$56,000 + \$14,573 = \$215,776 \] --- # **Final Answer** ## **Interest Expense for the year ended December 31, 2024:** \[ \boxed{\$215,776} \] --- **Summary:** The total interest expense for Moonlight Bay Resorts for the year ended December 31, 2024 is **\$215,776** (rounded to the nearest dollar).

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