Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 14, Problem 14.14BE
Convertible bonds
• LO14–5
Hoffman Corporation issued $60 million of 5%, 20-year bonds at 102. Each of the 60,000 bonds was convertible into one share of $1 par common stock. Prepare the
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Exercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and
Retirement (LO10-5, LO10-6)
Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September
30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the
following journal entries.
a. April 1, 2021, to record the issuance of the bonds.
b. September 30, 2021, to pay interest and to amortize the bond premium.
c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume
an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31.
d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities.
(ignore possible income tax effects.)
(If no entry is required for a transaction/event,…
QUESTION 9
Bonds Payable has a balance of $1,000,000, and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the amount of gain or loss on redemption?
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Interest for bond (held-to-maturity) investments
On February 1, Hansen Company purchased $120,000 of
5%, 20-year Knight Company bonds at their face
amount plus 1 month's accrued interest. The bonds pay
interest on January 1 and July 1. On October 1, Hansen
Company sold $40,000 of the Knight Company bonds
acquired on February 1, plus 3 months' accrued interest.
On December 31, 3 months' interest was accrued for the
remaining bonds.
Determine the interest earned by Hansen Company on
Knight Company bonds for the year.
M
Chapter 14 Solutions
Intermediate Accounting, 10 Ed
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10QCh. 14 - When a notes stated rate of interest is...
Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Prob. 14.22ECh. 14 - Prob. 14.36ECh. 14 - Prob. 14.14PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.21PCh. 14 - Prob. 14.3DMP
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- 17 The company has outstanding bonds payable with a total face value of $100,000. On July 1, the company redeemed the bonds by purchasing them on the open market for a total of $102,700. Which ONE of the following would be reported at the time of the redemption of the bonds assuming that the bonds have an unamortized premium of $2,000? O Loss on Bond Redemption of $4,700 O Gain on Bond Redemption of $2,700 O Loss on Bond Redemption of $700 O Gain on Bond Redemption of $700 O Gain on Bond Redemption of $2,000 O Gain on Bond Redemption of $4,700 O Loss on Bond Redemption of $2,700 O Loss on Bond Redemption of $2,000arrow_forwardProblem 5 On January 1, 2022, Luffy Company issued 500 of its 5-year, 10% P1,000 face value bonds at 112. Each bond includes a warrant that allows the holder to purchase 20 ordinary shares with par value P100 at P110 per share. The market value of the bond ex-warrant at the time of issuance is 98. The amount assigned to the share warrants outstanding upon issuance is P70,000. Required: (assume the following independent cases): 12. If 60% of the warrants were exercised and the rest were expired, compute for the amount to be credited to Share premium immediately after the exercise of the said warrants. 13. If all warrants were exercise, compute for the amount to be credited to Share premium immediately after the exercise of the said warrants. Can you show the solutions? The answers are: 12. 102,000 13. 170,000arrow_forwardQ 11 On January 1, 20x8, James Corporation issued $500,000, 10%, 5-year bonds, at 98. The bonds pay semiannual interest on January 1 and July 1. The company uses the straight-line method of amortization and has a calendar year end. The journal entry on July 1, 20x8 would include which of the following? Select one: a. Debit to Bond Interest Expense for $26,000 b. Debit to Bond Interest Expense for $25,000 c. Credit to cash for $26,000 d. None of the abovearrow_forward
- MGMT FFAC Ch 10: Exercises Part A: Entity J issued $400,000, 10%, 10-year bonds on January 1, 2024, at par. Interest is payable annually on December 31. Instructions Prepare all journal entries made in 2024 related to the bond issue and a partial balance sheet showing the bonds at December 31.arrow_forwardLO 13.3 Pinetop Corporation issued $150,000 10-year bonds at par. The bonds have a stated rate of 6% and pay interest annually. What is the journal entry to record the sale of the bonds?arrow_forwardMa3. 24 y Company issued $100,000, 6% bonds on January 1, Year 1 at 103. Each $1,000 bond included 20 detachable stock warrants. Each warrant allowed the holder to purchase one share of y Company’s $1 par value common stock for $20 per share. On the date of issue, each warrant had a fair value of $5 per warrant. The entry to record the issue of the bonds would include A debit to discount on bonds payable for $7,000 A debit to cash for $143,000 A credit to paid-in capital, stock warrants for $40,000 A credit to premium on bonds payable for $3,000arrow_forward
- P 16 On 1/10/2019 ABC company issued a $120,000, 12%, 4 years bonds. The bonds pay interest quarterly on 1/1 , 1/4,1/7 , and 1/10. The bonds were issued for 136,293.25, since the market rate was equal 8%. On 1/5 / 2021 the company called 75% of its outstanding at 102² Required: Based on the above given information, answer the following question: (a) What is the amount of interest expense that must be presented on ABC" Company income statement for the year ended December, 31, 2019? (b) What is the bond's carrying value that must be presented on the statement of financial position as on December, 31, 2020? (c) Prepare ALL the required journal entries for the year 2021.arrow_forwarduestion 3 B. Corporation issued $10 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041. B. Corp.'s fiscal year ends on December 31. Prepare the following journal entries. a- April 1, 2021, to record the issuance of the bonds. b-September 30, 2021, to pay interest and to amortize the bond premium. c- March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).arrow_forwardvalue tables in Appendix A al lhe Ch PR 11-3A Entries for bonds payable, including bond redemption The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar Obj. 2 V 3. $64,317,346 20Y1 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 20Y1, at a market (effective) rate of 1a4 receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30 Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined uu July SHOW ME HOW EXCEL TEMPLATE the semiannual interest payment. 20Y2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined wth the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y3 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond…arrow_forward
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