Leong Corporation was authorized to issue $500,000 face value bonds on January 1, 2017. Thecorporation issued $100,000 of face value bonds on that date. The bonds will mature on December31, 2020. Interest is paid semi-annually on June 30 and December 31 each year. The bond interestrate per the terms of the indenture is 12% per year.Required: Answer the questions for each of the following cases.Case A: The bonds were issued at face value.Case B: The bonds were issued for $112,000.Case C: The bonds were issued for $88,000.a. How much cash does Leong receive for the bonds?b. How much annual interest must the corporation pay? On what amount does the corporationpay?c. Prepare the journal entry to record the sale of the bonds.d. Record the entries applicable to interest and straight-line amortization for June 30, 2017 andfor December 31, 2017.

When the bonds are issued at face value then it is called issued at…

Answered: eong Cornoration was authorized to…

Business

Accounting

eong Cornoration was authorized to jssue $500 000 face value bonds on lanuary 1 2017 The

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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Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

Question

Leong Corporation was authorized to issue $500,000 face value bonds on January 1, 2017. The
corporation issued $100,000 of face value bonds on that date. The bonds will mature on December
31, 2020. Interest is paid semi-annually on June 30 and December 31 each year. The bond interest
rate per the terms of the indenture is 12% per year.
Required: Answer the questions for each of the following cases.
Case A: The bonds were issued at face value.
Case B: The bonds were issued for $112,000.
Case C: The bonds were issued for $88,000.
a. How much cash does Leong receive for the bonds?
b. How much annual interest must the corporation pay? On what amount does the corporation
pay?
c. Prepare the journal entry to record the sale of the bonds.
d. Record the entries applicable to interest and straight-line amortization for June 30, 2017 and
for December 31, 2017.

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