Excercise 12-8 Floating-rate debt (LO 12-5)On January 1, 20X1, Brooks Energy issued $200 million of 15-year, floating-rate debentures atpar value. The debentures pay interest on June 30 and December 31 of each year. The floatinginterest rate is set equal to "LIBOR plus 6%" on January 1 of each year. The LIBOR was 6% whenthe bonds were issued and 8% on January 1, 20X2.Required:1. How much cash interest did Brooks Energy pay on the debentures in 20X1? How much will itpay in 20X2?2. How much interest expense did the company record on the debentures in 20X1? How muchwill it record in 20X2?(Enter your answer in millions.)

For 20X1:Interest rate calculation:LIBOR at issuance + 6% = 6% + 6% = 12%Cash interest for the…

Answered: Excercise 12-8 Floating-rate debt (LO…

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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Knowledge Check 01 On January 1, Year 1, Mainland, Inc., issued five year, 9% bonds with a face value of $500,000 for cash of $520,275. The bonds mature in five years and interest is payable annually on December 31. The market rate was 8% on the date the bonds were issued. The market rate rose to 11% on December 31, Year 1. Mainland uses the effective-interest amortization method. What amount of interest expense will be recognized on December 31, Year 1? (Round your answer to the nearest dollar.) Interest expense 9,000 MacBook Air F2 BO F3 F5 411 F4 F6 F7 F8 F9 & R * CO .. %24
Cornerstone Exercise 9-27 (Algorithmic)Debt Issued at a Discount (Straight Line) On January 1, 2020, Drew Company issued $1,250,000, 5-year bonds for $1,112,500. The stated rate of interest was 4% and interest is paid annually on December 31. Required: Prepare the amortization table for Drew Company's bonds. If an amount box does not require an entry, leave it blank and if the answer is zero, enter "0". Drew Company Amortization Table Period Cash Payment (Credit) Interest Expense (Debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value At issue $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 $fill in the blank 5 12/31/20 fill in the blank 6 fill in the blank 7 fill in the blank 8 fill in the blank 9 fill in the blank 10 12/31/21 fill in the blank 11 fill in the blank 12 fill in the blank 13 fill in the blank 14 fill in the blank 15 12/31/22 fill in the blank 16 fill in the blank 17 fill in the…
Requirement 1. Determine the present value of 10-year bonds payable with face value of $93,000 and stated interest rate of 12%, paid semiannually. The market rate of interest is 12% at issuance. (Round intermediary calculations and final answer to the nearest whole dollar.) 1. Determine the present value of 10-year bonds payable with face value of $93,000 and stated interest rate of 12%,paid semiannually. The market rate of interest is 12%at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the market interest rate is 8%.
7 Quatro Company issues bonds dated January 1, 2021, with a par value of $700,000. The bonds' annual contract rate is 13%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $717,237. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare a straight-line amortization table for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Semiannual Interest Period- End 01/01/2021 06/30/2021 12/31/2021 06/30/2022 12/31/2022 06/30/2023 12/31/2023 Required 2 Required 3 Prepare a straight-line amortization table for these bonds. Note: Round your intermediate calculations to the nearest dollar amount. Unamortized Premium X Answer is complete but not entirely correct. $ 2,873 2,873 X 2,873 x 2,873 x 2,873 x 14,364 0 $ Carrying…
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Paulson Company issues 10%, four-year bonds, on January 1 of this year, with a par value of $98,000 and semiannual interest payments. Carrying Value $ 91,307 92,144 92,981 Semiannual Period-End Unamortized Discount (0) January 1, issuance (1) June 30, first payment (2) December 31, second payment $ 6,693 5,856 5,019 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on January 1. (b) The first interest payment on June 30. (c) The second interest payment on December 31. View transaction list Journal entry worksheet 1 2 3 > Record the issuance of the bonds on January 1. Note: Enter debits before credits. Date General Journal Debit Credit January 01 Record entry Clear entry View general journal
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Premium Amortization On the first day of the fiscal year, a company issues a $3,500,000, 6%, 9-year bond that pays semiannual interest of $105,000 ($3,500,000 × 6% × ½), receiving cash of $4,322,808. Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Premium on Bonds Payable Cash
8. On January 1, Martinez Inc. issued $6,000,000, 11% bonds for $6,390,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of A) $370,260 B) $369,000 C) $347,000 D) $330,000 13
9
Question 6 (i) On 1 April, year 1, Happy Corporation issues $50 million of 10%, 30-year bonds payable at par. Interest on the bonds is payable semiannually each 1 April and 1 October. The journal entry to record the first cash payment to bondholders on 1 October, year 1, will include: A: A credit to Cash of $5,000,000. B: A credit to Interest Payable of $2,500,000. C: A debit to Bonds Payable of $5,000,000. D: A debit to Interest Expense of $2,500,000. (ii) ABC Manufacturing Company sold a vehicle for cash of $70,000 with a loss of $10,000 recognized. The accumulated depreciation amounted to $140,000. The original cost of the asset must have been: A: $130,000. B: $150,000. C: $200,000. D: $220,000.

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