On January 1, 2024, ABC Company issued $800,000 of its 20 year 10% bonds.The bonds were priced to yield 8%Interest is payable on June 30 and December 31.ABC, Company records interest expense at the effective rate and elected the option to report these bonds at their fair value.On June 30, 2024, the fair value of the bonds was $995,000 as determined by their market value in the over-the-counter market.General (risk-free) interest rates decline created a $25,000 increase in fair value.PV annuity: 5%, 40 = 17.15909PV annuity: 4%, 40 = 19.79277PV single sum: 5%, 40 = 14205PV single sum: 4%, 40 = 20829Required:a)Determine the price of the bonds on January 1, 2024.b) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry.

Bond issuance date Jan,1,2024 10% Bond -$ 800000 Yield 8% Interest is payable on 30 June and 31Dec…

equired: ) Determine the price of the bonds on January 1, 2024. ) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry

equired: ) Determine the price of the bonds on January 1, 2024. ) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Mitchell Inc. issued 240, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest…

A: Bond Amortization: When bonds are issued at a price less than the face value, it is called bonds…

Q: On June 1, 2024, Wildhorse, Inc. issued $9,760,000, 6 % bonds for $9,566,020, which includes accrued…

A: Bond is a financial instrument which can be used in raising the funds for large organization. It is…

Q: Devin Company computes the following bond interest amortization table for bonds issued on January 1,…

A: A bond is a fixed pay instrument issued to represents to an advance made by a financial specialist…

Q: The following section is taken from Swifty Corporation’s balance sheet at December 31, 2021.…

A: Loss on redemption of bonds = Redemption value - Face value of bonds = (549500*104/100) - 549,500 =…

Q: A company sold bonds on January 1, 2021, for $207,913. This price represents a market rate of 9% on…

A: Bonds sold at premium: When the bonds are sold at a price more than its face value then the excess…

Q: Prepare the journal entry to record the redemption of the bonds at maturity, assuming interest for…

A: Bonds is a financial debt instrument that pays fixed periodic interest and face value amount at the…

Q: Madison Corporation is authorized to issue $580,000 of 6-year bonds dated June 30, 2019, with a…

A: Time value of money :— According to this concept, value of money in present day is greater than the…

Q: What is the bonds' ANNUAL market rate of interest? % How much total CASH will the company pay for…

A: Bonds payable: It is a long term liability to the organization issuing it. It is issued to raise…

Q: Frozen Company issues $34,800 of ten year bonds on January 1, 2020 at 108. It uses the straight line…

A: Financial statements are formal reports that summarize the financial performance, financial…

Q: Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds:…

A: Bonds are debt instruments issued by organizations to raise funds to meet various requirements. The…

Q: On Mar. 1, 2022, Top Company issued P 700,000 of 10% bonds to yield 8%. Interest is payable…

A: Issue price of bonds will be present value of maturity & interest annuity at yield rate.

Q: In its Dec. 31, 2020 statement of financial position, how much current liabilities should be…

A: Non-current liabilities, as the name suggests, are those obligations which an entity is not required…

Q: On July 1 2019, Barokah Company issued RM45,000, notes payable to fund its business with 4.5%…

A: As the questions asked have more than 1 question, the first question is answered. If you want the…

Q: Shown are data from recent reports of two toy makers. Dollar amounts are stated in thousands. Toyco…

A: Since you have posted two different questions, we will do the first one for you. Please post the…

Q: Frozen Company issues $33,600 of ten year bonds on January 1, 2020 at 108. It uses the straight line…

A: INTRODUCTION: When bonds are issued, cash is received, and bonds payable are credited. But, if a…

Q: 1a) What was the issue price on January 1 of this year? 1b) What amount of interest expense should…

A: Price of bond is the present value of coupon payment and present value of par value of bond taken on…

Q: On March 1, 2024, Baddour, Incorporated, issued 10% bonds, dated January 1, with a face amount of…

A: Bonds payable refer to the debt instrument which is issued for fundraising. A company can issue…

Q: Determining the Proceeds from Bond Issues Madison Corporation is authorized to issue $760,000 of…

A: The bonds are issued at premium if market interest is lower than the stated interest of bonds and…

Q: With the stated information provided by Clover Inc as at Dec 31, 2021, prepare long-term liabilities…

Q: The total bond interest expense that should be reported by the company for the year 2020.

A: Toledo Inc. has issued bonds of P 80,00,000 on 01.01.2016. The bonds are for a tenure of 25 years…

Q: market was 11, and the standard bonds pay interest semi-annually 1. Prepare an effective-interest…

A: The question is based on the concept of Financial Accounting.

Q: On May 1, 2022, Sandhill Corp. issued $600,000, 6%, 5-year bonds at face value. The bonds were dated…

A: Lets understand the basics.Journal entry is required to make to record event and transaction in the…

Q: Required informetion (The following information applies to the questions displayed below.] On…

A: Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Net Income =…

Q: de, Inc. issued $758,000 of bonds on December 15, 2022, when the market rate of interest was 6%. The…

A: Here are the journal entries to record the issuance of the bonds on December 15, 2022, and the…

Q: Determining the Proceeds from Bond Issues Madison Corporation is authorized to issue $390,000 of…

A: Face value$390,000.00Interest rate11.00%Year to maturity7 years

Q: Determining the Proceeds from Bond Issues Madison Corporation is authorized to issue $630,000 of…

A: A bond is a debt instrument issued by entities to raise capital from investors. The person issuing…

Q: Suppose serials bonds with face value of P1,000,000 scheduled to be retired on December 31, 2024 are…

A: Here in this question, we are required to calculate the gain/(Loss) that needs to recorded at…

Q: crane Corporation issued 2,100, 9%, 5-year, $1,000 bonds dated January 1, 2020, at 100. Interest is…

A: Cash received = 2,100 bonds x $1,000 per bond x 100% = $2,100,000

Q: Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds:…

A: Bonds refer to borrowing security that is issued by the company to raise funds from the market at a…

Q: Required information The following information applies to the questions displayed below.] Greener…

A: The Note has been issued for the amount borrowed on Nov 01, 2018. The effect of this transaction is…

Q: In order to fulfill its financing activities, Astro Co. issued Rp 505.000,000, 12%, 10-year bonds…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: On January 1, 2020, Crane Company purchased at face value, a $1110, 10% bond that pays interest on…

A: Bonds are instruments acknowledging the debt due from one person to another person to be paid on…

Q: Determine the amounts that Azur Inc. would report in relation to each of its investments on its…

A: When a company purchases a bond, the accounting treatment depends on the purpose for which the bond…

Q: Please help find issue price of bonds Requirements- Using PV function in excel calculate issue price…

A: calculation of issue price face value of bond -620,000 discount rate 10%…

Q: Frozen Company issues $34,800 of ten year bonds on January 1, 2020 at 108. It uses the straight line…

A: Written reports on a company's financial performance are known as financial statements. They…

Q: e following section is taken from Oriole Ltd.s balance sheet at December 31, 2019. on-current…

A: Bonds Redemption -Bonds are issued with a maturity date that indicates when the bond issuer must…

Q: On February 1, 2019, Leary Corporation issued 5-year bonds dated January 1, 2019, with a par value…

A: A government, municipality, company, or other entity may issue a bond payable, also referred to as a…

Q: 3. On July 1, 2021, Glamorous Corporation issued 11% bonds in the face amount of P2,000,000 that…

A: Semiannual interest payment = Face value of bonds x rate of interest x no. of months/12 = P2,000,000…

Q: On August 1, 2022, Bramble Corp. issued $482,400, 8%, 10-year bonds at face value. Interest is…

A: As per accrual principle of accounting, all the expenses need to be accounted for within the…

Q: Show the proper balance sheet presentation for the liability for bonds payable on the December 31,…

A: Bonds are type of security which is issued at the time when an entity or government asks money from…

Q: On September 1, 2024, Sheridan Corporation issued $640,000 of 10-year, 3% bonds at 97. Interest is…

A: Bond are non current liabilities issued by organization. As per IFRS 9 Financial instruments a Bond…

Q: On September 1, 2021, Evansville Lumber Company issued $80 million in 20-year, 10 percent bonds…

A: A bond is an instrument which represents a loan or a borrowing which is made by an investor to…

Q: On January 1, 2019 Ivanhoe Corporation issued $640,000, 5%, 5-year bonds at face value. Interest is…

A: The journal entries are preapred to record the transactions on regular basis. The bonds payable are…

Question

On January 1, 2024, ABC Company issued $800,000 of its 20 year 10% bonds.
The bonds were priced to yield 8%
Interest is payable on June 30 and December 31.
ABC, Company records interest expense at the effective rate and elected the option to report these bonds at their fair value.
On June 30, 2024, the fair value of the bonds was $995,000 as determined by their market value in the over-the-counter market.
General (risk-free) interest rates decline created a $25,000 increase in fair value.
PV annuity: 5%, 40 = 17.15909
PV annuity: 4%, 40 = 19.79277
PV single sum: 5%, 40 = 14205
PV single sum: 4%, 40 = 20829
Required:
a)
Determine the price of the bonds on January 1, 2024.
b) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Details Available

VIEW

Step 2 a) Pirce of the Bond 1 jan, 2024

VIEW

Step 3 Comprehensiv Interest Income on Bond

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Some of the questions are in the screenshots to make it easier! The following section is taken from Ohlman Corp.’s balance sheet at December 31, 2018. Current liabilities Interest payable $ 112,000 Long-term liabilities Bonds payable, 7%, due January 1, 2021 1,600,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date.(a)Journalize the payment of the bond interest on January 1, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.
On January 2, 2021, $225150 in 11 year, 5% bonds with a market interest rate of 9%, and interest payable semiannually, were issued for $189980. On June 30, bond interest was paid. On December 31, the corporation showed an after tax Net Income of $53630. On December 31, bond interest was paid; and dividends were declared and paid. What is the Bond Interest Expense on the Income Statement on December 31, 2021??
The balance sheet for Ivanhoe Consulting reports the following information on July 1, 2022. Long-term liabilities Bonds payable $4,500,000 Less: Discount on bonds payable 315,000 $4,185,000 Ivanhoe decides to redeem these bonds at 101 after paying annual interest.Prepare the journal entry to record the redemption on July 1, 2022.
The following section is taken from Bramble Corp.’s balance sheet at December 31, 2021. Current Liabilities Interest Payable $ 89,500 Long-term Liabilities Bonds payable, 5%, due January 1, 2024 1,790,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. a) Journalize the payment of the bond interest on January 1, 2022. b) Assume that on January 1, 2022, after paying interest, Bramble calls bonds having a face value of $602,000. The call price is 105. Record the redemption of the bonds. c) Prepare the entry to record the accrual of interest on December 31, 2022.
Subject: accounting
answer in text form please (without image
The Pearl Company issued $240,000 of 10% bonds on January 1, 2025. The bonds are due January 1, 2030, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Pearl's journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) No. (a) (b) (c) Date Account Titles and Explanation Debit Cred
Frozen Company issues $31,800 of ten year bonds on January 1, 2020 at 108. It uses the straight line method of amortization and prepares annual financial statements on December 31st. (Keep two decimal places in all your intermediate calculations). Required 1: What is the carrying value of the bonds on 2020 Financial Statements? Required 2: What is the carrying value of the bonds on 2021 Financial Statements? Required 3: What is the carrying value of the bonds on 2024 Financial Statements?
Please do not give solution in image format ? And Fast answering please and explain proper steps by Step.
please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image)
What is the journal entry to record issuance of the bonds on January 1, 2019? Dr. Cash, P500,000 and Cr. Bonds Payable, P500,000 Dr. Cash, P500,000 Cr. Premium on Bonds Payable, P28,253 & Cr. Bonds Payable P471,747 Dr. Cash, P471,747; Dr. Discounts on Bonds Payable, P28,253 & Cr. Bonds Payable P500,000 Dr. Cash, P471,747; Dr. Interest Expense, P28,253 and Cr. Bonds Payable P500,000
What are the journal entries ?