Financial and Managerial Accounting
Financial and Managerial Accounting
7th Edition
ISBN: 9781259726705
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 10, Problem 1PSB

1.

To determine

Bonds issue price.

1.

Expert Solution
Check Mark

Explanation of Solution

(a)

Cash flow

Table

Value from table

Amount

($)

Present value ($)

Par value

B.1

0.6139

90,000

55,251

Annuity (Interest)

B.3

7.7217

5,400

41,697

Bond’s issue price

96,948

Premium on bond

6,948

Table (1)

Working notes:

Given,
Bonds par value is $90,000.
Rate of interest is 12%.
Time period is 0.05.

Compute the interest on bond,

Interest on bond=Bondvalue×Rateofintrest×Timeperiod =$90,000×12%×0.05 =$5,400

Hence, interest on bond is $5,400.

(b)

Issue of bonds at premium on January 1, 2017

Date

Account Title and Explanation

Post.

Ref.

Debit

($)

Credit

($)

January 1

Cash

96,948

Premium on bonds payable

6,948

Bonds payable

90,000

(To record the sold bonds at pre)

Table (2)

  • Cash account is the assets account. Since the cash is received, the value of assets is increased. So, debit the credit the cash account.
  • Premium on bonds payable account is the liabilities account. Here, at the time of issue of the bonds premium has been given which increases the liabilities of the company. So, debit the Premium on bonds payable account.
  • Bonds payable account is the liabilities account. Bonds has been sold, which increases the liabilities of the company. So, credit the bonds payable account.

2.

To determine

Bonds issue price.

2.

Expert Solution
Check Mark

Explanation of Solution

(a)

Cash flow

Table

Value from table

Amount

($)

Present value ($)

Par value

B.1

0.5584

90,000

50,255

Annuity (Interest)

B.3

7.3601

5,400

39,745

Bond’s issue price

90,000

Table (3)

Hence, bonds issue price is $90,000.

(b)

Sale of bonds at par on January 1, 2017

Date

Account Title and Explanation

Post.

Ref.

Debit

($)

Credit

($)

January 1

2017

Cash

90,000

Bonds payable

90,000

(To record the sold bonds at par)

Table (4)

  • Cash account is the assets account. Since the cash is received, the value of assets is increased. So, debit the credit the cash account.
  • Bonds payable account is the liabilities account. Bonds has been sold, which increases the liabilities of the company. So, credit the bonds payable account.

3.

To determine

Bonds issue price

3.

Expert Solution
Check Mark

Explanation of Solution

(a)

Cash flow

Table

Value from table

Amount

($)

Present value ($)

Par value

B.1

0.5083

90,000

45,747

Annuity (Interest)

B.3

7.0236

5,400

37,927

Bond’s issue price

83,674

Discount on bond

6,326

Table (5)

Hence, bonds issue price is $83,674.

(b)

Issue of bonds at discount on January 1, 2017

Date

Account Title and Explanation

Post.

Ref.

Debit

($)

Credit

($)

January 1

Cash

83,674

Discount on bonds payable

6,326

Bonds payable

90,000

(To record the sold bonds at discount)

Table (6)

  • Cash account is the assets account. Since the cash is received, the value of assets is increased. So, debit the credit the cash account.
  • Discount on bonds payable account is the liabilities account. Here, at the time of issue of the bonds discount has been given which decrease the liabilities of the company. So, debit the discount on bonds payable account.
  • Bonds payable account is the liabilities account. Bonds has been sold, which increases the liabilities of the company. So, credit the bonds payable account.

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Chapter 10 Solutions

Financial and Managerial Accounting

Ch. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 10DQCh. 10 - What is the issue price of a $2,000 bond sold at...Ch. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Prob. 16DQCh. 10 - Prob. 17DQCh. 10 - Prob. 18DQCh. 10 - Prob. 19DQCh. 10 - Prob. 20DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Recording bond issuance and discount amortization...Ch. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 16QSCh. 10 - Prob. 17QSCh. 10 - Prob. 18QSCh. 10 - Prob. 19QSCh. 10 - Prob. 20QSCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Prob. 1PSACh. 10 - Prob. 2PSACh. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Prob. 6PSACh. 10 - Prob. 7PSACh. 10 - Prob. 8PSACh. 10 - Prob. 9PSACh. 10 - Prob. 10PSACh. 10 - Prob. 11PSACh. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 7PSBCh. 10 - Prob. 8PSBCh. 10 - Prob. 9PSBCh. 10 - Problem 10-10BB Effective Interest: Amortization...Ch. 10 - Prob. 11PSBCh. 10 - Prob. 10SPCh. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Prob. 5BTNCh. 10 - Prob. 6BTNCh. 10 - Prob. 7BTNCh. 10 - Prob. 8BTNCh. 10 - Prob. 9BTN
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