be required in its definitions of assets and liabilities for debt instruments. It is thought that defining the nature of liabilities would help the IASB’s thinking on the difference between financial instruments classified as equity and liability. Witco Limited patented and successfully tested a new e-cigarette. To expand its ability to produce and market this new product, Witco needs to raise $400,000. On January 1 2010, Witco issued a 12% $400,000, 5 year bond. The bond pays interest semi-annually on June 30 and December 31. The bonds effective interest rate is 10%. Calculate the proceeds from the sale of the bond & the discount or premium. Give 2 reasons why you think it is discount/premium. Prepare a bond amortization schedule for the life of the bond. Prepare the journal entries to record the following a) The issuance of the bond on Jan 1 2010 b) The first interest payment c) The retirement of the bond at a $400,000 call price on January 1 2013
The difference between debt and equity in an entity’s
- Calculate the proceeds from the sale of the bond & the discount or premium. Give 2 reasons why you think it is discount/premium.
- Prepare a bond amortization schedule for the life of the bond.
- Prepare the
journal entries to record the following a) The issuance of the bond on Jan 1 2010 b) The first interest payment c) The retirement of the bond at a $400,000 call price on January 1 2013
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How did you calculate the Annuity factor at 5%?
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