FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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4. Broadside Importers recently financed a multi-state expansion by issuing $50,000,000 in 10-
year bonds with a stated interest rate of 8%. The bonds were issued to yield 10%. The bonds pay
interest twice per year. Broadside included a call feature that allows the company to repurchase
all of the bonds after they have been outstanding for at least 2 years. In the event of a call,
Broadside will pay bondholders $50 per $1,000 bond (there are 50,000 of them).
Required:
a. Prepare the bond amortization schedule for the full 10-year period.
b. Prepare the journal entry to record the issuance of these bonds.
c. Prepare the journal entry to record the second interest payment.
d. Assume that Broadside calls 100% of the bonds at the end of year 3 (interest payment 6).
The market price at that time $45,000,000. Prepare the journal entry to record the call.
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Transcribed Image Text:4. Broadside Importers recently financed a multi-state expansion by issuing $50,000,000 in 10- year bonds with a stated interest rate of 8%. The bonds were issued to yield 10%. The bonds pay interest twice per year. Broadside included a call feature that allows the company to repurchase all of the bonds after they have been outstanding for at least 2 years. In the event of a call, Broadside will pay bondholders $50 per $1,000 bond (there are 50,000 of them). Required: a. Prepare the bond amortization schedule for the full 10-year period. b. Prepare the journal entry to record the issuance of these bonds. c. Prepare the journal entry to record the second interest payment. d. Assume that Broadside calls 100% of the bonds at the end of year 3 (interest payment 6). The market price at that time $45,000,000. Prepare the journal entry to record the call.
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