On the 1st of may 2023 the Blue Company issued and sold convertible bonds. The bonds have a term of 8 years and their final maturity date is 1st of may 2031. Interest is paid annually on the 1st of may each year, and the first interest payment will be 1st of may 2024. The nominal value of the bonds is 750,000,000. The nominal interest rate of the bonds is 5.5% and they were sold based ona 7.5% yield. The bonds can be converted into shares in the company at a rate of 4. Share price in the Blue Company when the bonds were sold were 3.5. No bonds were converted into equity in 2023. If the bonds were not convertible they would have been sold at a yield of 10.5%. The income tax rate is 21% What entries must be made in the Blue Company books in 2023 because of the bonds?

On the 1st of may 2023 the Blue Company issued and sold convertible bonds. The bonds have a term of 8 years and their final maturity date is 1st of may 2031. Interest is paid annually on the 1st of may each year, and the first interest payment will be 1st of may 2024. The nominal value of the bonds is 750,000,000. The nominal interest rate of the bonds is 5.5% and they were sold based ona 7.5% yield. The bonds can be converted into shares in the company at a rate of 4. Share price in the Blue Company when the bonds were sold were 3.5. No bonds were converted into equity in 2023. If the bonds were not convertible they would have been sold at a yield of 10.5%. The income tax rate is 21% What entries must be made in the Blue Company books in 2023 because of the bonds?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

See similar textbooks

Similar questions

Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000
A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
On December 31, 2022, QUIAMBAO CORP. issued serial bonds with face value of P4,000,000 and a stated 10% interest rate, payable annually every December 31. The bonds are issued on this date with a 12% effective yield. The bonds mature at an annual installment of P1,000,000 every December 31, starting December 31, 2023. Use PV factors rounded to THREE decimal places.What is the carrying amount of the serial bonds on December 31, 2022? 2,829,000 3,842,000 2,903,000 3,903,000
On January 1, 2024, Martin Company issued $5,000,000, 10% bonds. Interest is payable semi-annually on June 30 and December 31. The bonds mature on January 1, 2034. The bonds are sold to yield 12%. Will the bonds be issued at a premium or discount? Explain why. Calculate the issue price of the bonds. Prepare the amortization table for the bonds assuming the effective interest method is used to calculate interest. You may (should) prepare the table in Excel then copy and paste into Word.
On June 30, 2024, Single Computers issued 5% stated rate bonds with a face amount of $280 million. The bonds mature on June 30, 2039 (15 years). The market rate of interest for similar bond issues was 4% (2.0% semiannual rate). Interest is paid semiannually (2.5%) on June 30 and December 31, beginning on December 31, 2024. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds on June 30, 2024. 2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method.
On June 30, 2024, Single Computers issued 5% stated rate bonds with a face amount of $280 million. The bonds mature on June 30, 2039 (15 years). The market rate of interest for similar bond issues was 4% (2.0% semiannual rate). Interest is paid semiannually (2.5%) on June 30 and December 31, beginning on December 31, 2024. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds on June 30, 2024 2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price of the bonds on June 30, 2024. Note: Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount, not in millions. Table values are based on: n = i = Cash Flow Interest Principal Price of bonds Amount Present Value
On June 1, 2023, Numbers Company issued a 3-year, P5,000,000 face value bonds with a stated rate of 10%. The effective interest rate for similar bonds is 12%. Interest on the bonds is payable annually at June 1.The present value of the bond issued by Numbers Company on June 1, 2023 is? 4,759,815.00 4,801,335.38 5,248,660.00 5,000,000.00 The carrying amount/amortized cost of the bond to be reported by Numbers Company on December 31, 2023 is? 4,801,335.38 4,830,992.80 4,910,711.94 5,000,000.00 19.The non-current portion of the bond to be reported by Numbers Corporation on December 31, 2024 is? 0 4,830,992.80 4,877,495.63 4,910,711.94 The non-current portion of the bond to be reported by Numbers Corporation on December 31, 2025 is? 0 4,910,711.94 4,962,796.64 5,000,000.00
On June 30, 2024, Single Computers issued 8% stated rate bonds with a face amount of $100 million. The bonds mature on June 30, 2039 (15 years). The market rate of interest for similar bond issues was 5% (2.5% semiannual rate). Interest is paid semiannually (4.0%) on June 30 and December 31, beginning on December 31, 2024. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds on June 30, 2024. 2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price of the bonds on June 30, 2024. Note: Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount, not in millions. Table values are based on: Cash Flow Interest Principal Price of bonds n = i= Required 1 Period-End Amount On…
On June 30, 2024, Single Computers issued 8% stated rate bonds with a face amount of $100 million. The bonds mature on June 30, 2039 (15 years). The market rate of Interest for similar bond issues was 5% (2.5% semiannual rate). Interest is paid semiannually (4.0%) on June 30 and December 31, beginning on December 31, 2024. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1 EVA of $1. PVA of $1 EVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds on June 30, 2024 2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price of the bonds on June 30, 2024. Note: Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount, not in millions. Table values are based on: Cash Flow Interest Principal Price of bonds n= Amount Present Value Required Required 2>…