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 14.5BE
Effective interest on bonds
• LO14–2
On January 1, a company issued 7%, 15-year bonds with a face amount of $90 million for $82,218,585 to yield 8%. Interest is paid semiannually. What was interest expense at the effective interest rate on June 30, the first interest date?
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Required information
Exercise 9-11B Record bonds issued at a discount and related semiannual interest (LO9-6)
[The following information applies to the questions displayed below]
On January 1, Year 1, a company issues $500,000 of 6% bonds, due in 20 years, with interest payable semiannually on
June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 7%, the bonds will issue at $446,611.
Exercise 9-11B Part 2
2. Record the bond issue on January 1, Year 1, and the first two semiannual interest payments on June 30, Year 1, and December 31,
Year 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round
your final answers to the nearest whole dollar.)
View transaction list
Journal entry worksheet
1
2
3
Record the bond issue.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
January 01
Cash
446,611
Discount on Bonds Payable
Bonds Payable
Record entry
Clear entry
View…
Required information
Exercise 9-11B Record bonds issued at a discount and related semiannual interest (LO9-6)
[The following information applies to the questions displayed below.]
On January 1, Year 1, a company issues $440,000 of 7% bonds, due in 10 years, with interest payable semiannually on
June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 8%, the bonds will issue at $410,103.
Exercise 9-11B Part 1
Required:
1. Complete the first three rows of an amortization schedule. (Round your final answers to the nearest whole dollar.)
Interest
Increase in
Date
Cash Paid
Carrying Value
Expense
Carrying Value
01/01/Year 1
06/30/Year 1
12/31/Year 1
Question 9
Vadercat Limited issued $15 million 4.0 percent, 8 year bonds on
September 1, 2023. The market rate of interest on the date of the
issue was 4.5 percent. Interest is payable semi-annually on March 1
and September 1. The company's year-end is December 31.
Required:
a. Prepare all journal entries required to record the bonds in the
company's financial records for the first full year the bonds are
outstanding. The company uses the straight-line method of
amortizations.
b. Indicate how the bond obligation would be shown on the
company's year-end statement of financial position.
c. How much interest expense, related to this security, is shown
on the 2023 year end income statement?
d. How much interest expense, related to this security, will be
shown on the 2024 year end income statement?
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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