Blockbuster Co is building a new state of the art Cineplex at a cost of$3,500,000. They received a capital investment of $1,500,000. The remainder offunds will have to be borrowed so they decided to issue bonds. They haveissued 10.5%, 5-year bonds. These bonds were issued on January 1st, 2020, andpay semi-annual interest on July 1st and January 1st. The bonds yield 10%. Theyear-end is December 31st.Requirements: (Show all workings)I. Calculate the proceeds from the sale of the bond. Clearly, show theII.III.IV.amount of the premium or discount and state two reasons, whichsupport the premium or discount calculated.Prepare a bond amortization schedule for the bond's life.Prepare all the journal entries for 2020, 2023 & 2025.Assume that on July 1 2023, Blockbuster Co. retires the bond at a costof 1,065,000 plus accrued interest, if applicable. Prepare the journalentry to record this retirement.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Thompson Distributors sold $50,000 worth of bonds to raise money for a new warehouse. The bonds pay interest annually at 4% for 10 years. The market rate of interest for a similar instrument was 3%; therefore, the bonds sold for a premium at $54,265. a. Record the sale of the bonds. b. Record the first interest payment and the amortization of the bond premium. Round the interest to the nearest dollar. c. Determine the carrying value (book value) of the bonds after the first year. General Journal Date Account Debit Credit a. b.
MHB Corporation wished to raise money for a series of upcoming projects. On July 1, 2023, the company issued bonds with a face value of $5,485,000 due in 5 years, paying interest at a face rate of 8% on January 1 and July 1 each year. The bonds were issued to yield 6%. MHB used the effective interest method of amortization for bond discounts or premiums. The company's year-end was September 30. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Using 1. factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the premium or discount on the bonds. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answer to O decimal places e.g. 58,971.) Discount on bonds payable $ eTextbook and Media List of Accounts Save for Later Last saved 17 hours ago. Saved work will be auto-submitted on the due date. Auto- submission can take up to 10 minutes. Attempts: 0 of 3 used…
On January 1, 2015 FSU issued 4%, 5 year bonds with a face amount of 50 million dollars to fund the renovation of the Gym building (and 12 new volleyball courts). The market yield for bonds of similar risk and maturity was 5%. Interest is paid semiannually on June 30 and December 31. 1. Prepare a bond discount amortization schedule assuming the straight-line method was used. 2. Now assume the contract rate was 5%, the market rate was 4%. Prepare a bond premium amortization schedule assuming the straight-line method was used. Include all 10 payments in the table
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Hassan Mustafa realized that when the bonds mature on January 20, 2041, there must be $5,200,000 available to repay the bondholders. To have enough money on hand to meet this obligation, He suggested that ScanSoft set up a sinking fund (an interest-bearing account into which payments are made at regular intervals to provide a desired sum of money at a specified future time) using a specially designated savings account. The company earns interest of 1.6% compounded semi-annually on this sinking fund account. ScanSoft began making semi-annual payments to the sinking fund on July 20, 2021.ScanSoft issued the bonds, sold them all to the investment dealer, and used the money raised to continue its research and development.1. How much would an investor have to pay for one of these bonds to earn 4.4% compounded semi-annually?2.3. Suppose ScanSoft discovers on January 20, 2031, that it can earn 2.5% interest compounded semi-annually on its sinking fund account.a. What is the balance in the…
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Please put all of the necessary data and computations for better understanding. Thanks ?
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