Earnest Corporation issued $200,000, 10-year mortgage bonds to Eather Corporation at Par value. The bonds bear a nominal interest rate of 11% and interest is paid semi-annually on January 1 and July 1. The market rate of interest is 10%. The original issue price of bonds for Net Corporation would be (Round your answer to the nearest dollar) a. $212,462 b. $200,000 c. $105,975 d. $188,050

Earnest Corporation issued $200,000, 10-year mortgage bonds to Eather Corporation at Par value. The bonds bear a nominal interest rate of 11% and interest is paid semi-annually on January 1 and July 1. The market rate of interest is 10%. The original issue price of bonds for Net Corporation would be (Round your answer to the nearest dollar) a. $212,462 b. $200,000 c. $105,975 d. $188,050

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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On January 1, Elias Corporation issued 10% bonds with a face value of $100,000. The bonds are sold for $97,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 10 years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is a. $10,000 b. $3,000 C. $833 d. $10,300
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Yale Corporation issued $36,000 , 8 % ( cash interest payable semiannually on June 30 and December 31) 10-year bonds dated and sold on January 1. Yale amortizes any bond discount or premium using the effective interest amortization method and bond issuance costs are $900. If the bonds were sold to yield 9%, provide journal entries to be made at each of the following dates. a. January 1, for issuance of bonds. b. June 30, for the first interest payment. • Note: Round your answers to the nearest whole dollar. Date a. Jan. 1 Account Name Cash Discount and Debt Issuance Costs Bonds Payable To record bond issuance. b. June 30 Interest Expense Discount on Bonds Payable Cash To record interest payment. V V V V ✓ V Dr. 32,758 3,242 0 1,474 0 0 Cr. 0✔ 0✓ 36,000 ✓ 0x 30 x 1,440
I. Metro Company purchased $500,000, 10%, 5-year bonds on January 1, 20x1, with interest payable on July 1 and January 1. The market interest rate (yield) was 8% for bonds of similar risk and maturity. The market value on December 31, 20x1 was $555,000 and all bonds were sold for $507,500 on January 1, 20x2 after the second payment. Required: compute the bond price on January 1, 20x1, prepare the amortization schedule and record journal entries on January 1, 20x1, July 1, 20x1, December 31, 20x1 and January 1, 20x2 assuming the bond investment is classified as available-for-sale security.
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