QS 14-22B (Algo) Effective Interest: Bond premium computations LO P5Garcia Company issues 10%, 15-year bonds with a par value of $190,000 and semiannual interest payments. On the issue date, theannual market rate for these bonds is 8%, which implies a Selling price of 117 4. The effective interest method is used to allocateinterest expense.1. What are the issuer's cash proceeds from issuance of these bonds?2. What total amount of bond interest expense will be recognized over the life of these bonds?3. What amount of bond interest expense is recorded on the first interest payment date?Complete this question by entering your answers in the tabs below.Required 1 Required 2Required 3What are the issuer's cash proceeds from issuance of these bonds?Cash proceedsRequired 1Required 2 >

The bonds are reported as the long-term liabilities in the balance sheet. The bonds are issued at…

Answered: Garcia Company issues 10%, 15-year…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 74E

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Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Brief Exercise (Appendix 9A) Bond Issue Price On January 1, 2020, Ruby Inc. issued 3,000 $1,000 par value bonds with a staled rate of6% and a 10-year maturity. Interest is payable semiannually on June 30 and December 31. Required: What is the issue price if the bonds are sold to yield 8%? {Note: Round to nearest dollar.)
Cornerstone Exercise (Appendix 9A) Bond Issue Price On January 1, 2021, Callahan Auto issued $900,000 of 9%, 10-year bonds. Interest is payable semiannually on June 30 and December 31. Required: What is the issue price if the bonds are sold to yield 8%? (Note: Round to the nearest dollar.)
QS 10-11 (Algo) Straight-Line: Premium bond computations LO P3 Enviro Company issues 11.00 %, 10-year bonds with a par value of $310,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8.00 %, which implies a selling price of 124.875. The straight-line method is used to allocate interest expense. 1. What are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required I What are the issuer's cash proceeds from issuance of these bonds? Note: Round your final answer to nearest whole dollar amount. Cash proceeds Required 2 Required 3
Exercise 7-19 (Algo) Bonds payable-various issues LO 7-8 Reynolds Company issued $71 million face amount of 4.25% bonds when market interest rates were 4.13% for bonds of similar risk and other characteristics. Required: a. How much interest will be paid annually on these bonds? Note: Enter your answer in dollars, not millions of dollars. b. Were the bonds issued at a premium or discount? c. Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? a. Annual interest payment b. Bonds issued c. Annual interest expense will be
Exercise 10-4 (Algo) Straight-Line: Amortization of bond discount LO P2 Tano Company issues bonds with a par value of $82,000 on January 1, 2021. The bonds' annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $79,849. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare a straight-line amortization table for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a straight-line amortization table for these bonds. Note: Round your intermediate calculations to the nearest dollar amount. Semiannual Period-End Unamortized Carrying Value Discount (0) 01/01/2021 $ 2,151 $ 79,849 (1) 06/30/2021 80,208 (2) 12/31/2021 80,566 (3) 06/30/2022 80,925 (4) 12/31/2022 81,283…
Q-3: Dawlance Company issues 12%, 10-year bonds with a par value of Rs. 200,000 and annual interest payments. On the issue date, the annual market rate for these bonds is implies a selling price of 112. The effective interest method is used to allocate interest expense. A. What are the issuer's cash proceeds from issuance of these bonds? B. What total amount of bond interest expense will be recognized over life of these bonds? C. What amount of bond interest expense is recorded on the first interest payment date? D. Prepare the journal entries for the issuance of the bonds. Also calculate market price. 10%, which
QS 14-19A (Algo) Computing bond price C2 Compute the selling price of 8%, 10-year bonds with a par value of $340,000 and semiannual Interest payments. The annual market rate for these bonds Is 10%. Use present value Table B.1 and Table B.3 In Appendix B. Note: Round all table values to 4 decimal places, and use the rounded table values In calculations. Cash Flow $340,000 par (maturity) value $13,600 interest payment Price of Bond Table Value Present Value
Problem 10-3A (Algo) Straight-Line: Amortization of bond premium LO P3 Ellis Company issues 7.5%, five-year bonds dated January 1, 2021, with a $440,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $468,150. The annual market rate is 6% on the issue date. Required: 1. Calculate the total bond interest expense over the bonds' life. 2. Prepare a straight-line amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments. Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required Required 1 2 3 Prepare a straight-line amortization table for the bonds' life. Note: Round your intermediate and final answers to the nearest whole dollar. Semiannual Interest Period-End 01/01/2021 $ 28,150 $ 468,150 06/30/2021 462,520X 12/31/2021 06/30/2022 12/31/2022 06/30/2023 12/31/2023 06/30/2024 12/31/2024 06/30/2025 12/31/2025 Unamortized Carrying Premium Value…
QS 14-19A (Algo) Computing bond price C2 Compute the selling price of 10%, 10-year bonds with a par value of $290,000 and semiannual interest payments. The annual market rate for these bonds is 12%. Use present value Table B.1 and Table B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table values in calculations.) Answer is complete but not entirely correct. Cash Flow $290,000 par (maturity) value $14,500 interest payment Price of Bond Table Value 0.3118 11.4699 $ S Present Value 90,442 166,314 256,756
v2.cengagenow.com 403114 Discount Amortization On the first day of the fiscal year, a company issues a $1,100,000, 7%, 7-year bond that pays semiannual interest of $38,500 ($1,100,000 x 7% x 1/2), receiving cash of $1,041,903. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Exercise 14-4 (Algo) Straight-Line: Amortization of bond discount LO P2 Tano Company issues bonds with a par value of $94,000 on January 1, 2021. The bonds' annual contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $89,071. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare a straight-line amortization table for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a straight-line amortization table for these bonds. Note: Round your intermediate calculations to the nearest dollar amount. Carrying Value (0) (1) (2) (3) (4) (5) (6) Semiannual Period-End 01/01/2021 06/30/2021 12/31/2021 06/30/2022 12/31/2022 06/30/2023 12/31/2023 $ Unamortized Discount 4,929

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