Fowler Incorporated purchased $86,000 of bonds on January 1, 2024. The bonds pay interest semiannually and mature in 25 years, atwhich time the $86,000 principal will be paid. The bonds do not pay any amounts other than interest and principal. Fowler's intentionis to collect contractual cash flows and eventually sell the bonds within the next couple of years if the price is right. During 2024, thefair value of the bonds increased to $102,000. Fowler reports investments under IFRS No. 9.How much unrealized gain or loss will Fowler include in 2024 net income with respect to the bonds?Unrealized gain (loss) reported in net income

$16,000Explanation:Under IFRS 9, financial assets such as bonds are classified into three…

Answered: Fowler Incorporated purchased $86,000…

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, 2021, Shay Company issues $300,000 of 10%, 15-year bonds. The bonds sell for $293,250. Six years later, on January 1, 2027, Shay retires these bonds by buying them on the open market for $315,750. All interest is accounted for and paid through December 31, 2026, the day before the purchase. The straight-line method is used to amortize any bond discount. 1. What is the amount of the discount on the bonds at issuance?2. How much amortization of the discount is recorded on the bonds for the entire period from January 1, 2021, through December 31, 2026?3. What is the carrying (book) value of the bonds as of the close of business on December 31, 2026?4. Prepare the journal entry to record the bond retirement.
On January 1, 2024, Rupar Retallers purchased $100,000 of Anand Company bonds at a discount of $6,000. The Anand bonds pay 6% interest but were purchased when the market interest rate was 7% for bonds of similar risk and maturity. The bonds pay interest semiannually on June 30 and December 31 of each year. Rupar accounts for the bonds as a held-to-maturity Investment, and uses the effective interest method. In Rupar's December 31, 2024, journal entry to record the second period of Interest, Rupar would record a credit to interest revenue of Multiple Choice O O $3,000 $3,500 $1.300
Stinson Corporation issued $520,000 of 5%, 10-year bonds payable on March 31, 2019. The market interest rate at the date of issuance was 9%, and the bonds pay interest semiannually. Stinson Corporation's year-end is March 31. Review the following amortization table for Stinson's bonds: Using the amortization table for Stinson's bonds, answer the questionsbelow: Semiannual Interest Interest Discount Discount Bond Interest Date Payment Expense Amortization Balance Carying Amt Mar 31, 2019 $ 135,283 384,717 Sep 30, 2019 $ 13,000 $ 17,312 $ 4,312 130,971 389,029 Mar 31, 2020 13,000 17,506 4,506 126,465 393,535 Sep 30, 2020 13, 000 17,709 4,709 121,756 398,244 1 How much cash did Stinson Corporation borrow on March 31, 2019?How much cash will the company pay back at maturity on March 31,…
Barnett Industries, Inc., issued $600,000 of 8% bonds on January 1, 2019. The bonds pay interest semiannually on July 1 and January 1. The maturity date on these bonds is December 31, 2028. The firm uses the effective interest method of amortizing discounts and premiums. The bonds were sold to yield an effective interest rate of 9%. Barnett incurred legal and investment banking fees of $22,000 in issuing the bonds and amortizes these costs annually on a straight-line basis. Required: 1. Calculate the selling price of the bonds. 2. Prepare journal entries for the issuance of the bonds and debt issuance costs.
On January 1, 2023, Toyota Corporation purchased a newly issued $1,025,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Toyota's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model.Click here to view Table A.2 - PRESENT VALUE OF 1 - (PRESENT VALUE OF A SINGLE SUM)Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) b) Prepare an amortization schedule for the bond. (Round answers to 2 decimal places, e.g. 52.75.) c). Prepare the journal entries on the books of Toyota Corporation for each of the following dates. (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when the…
On June 1, 2024, Sheridan Bottle Company sold $3,420,000 in long-term bonds for $2,999,701. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. (Round answers to 0 decimal places, e.g. 25,000.) Credit Bond Discount Date 6/1/24 5/31/25 5/31/26 5/31/27 5/31/28 $ Credit Cash Debit Interest Expense Carrying Amou $ M W Ở Aca QL Acc Qui Acce
On June 1, 2024, Everly Bottle Company sold $3,000,000 in long-term bonds for $2,631,317. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. Instructions (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. Make sure all columns and rows are properly labeled. (Round to the nearest dollar.) (b) The sales price of $2,631,317 was determined from present value tables. Specifically, explain how one would determine the price using present value tables. (c) Assuming that interest and discount amortization are recorded each May 31, prepare the adjusting entry to be made on December 31, 2026. (Round to the nearest dollar.)
On January 1, 2019, Shay Company issues $700,000 of 10%, 15-year bonds. The bonds sell for $684,250. Six years later, on January 1, 2025, Shay retires these bonds by buying them on the open market for $731,500. All interest is accounted for and paid through December 31, 2024, the day before the purchase. The straight-line method is used to amortize any bond discount. 1. What is the amount of the discount on the bonds at issuance? 2. How much amortization of the discount is recorded on the bonds for the entire period from January 1, 2019, through December 31, 2024? 3. What is the carrying (book) value of the bonds as of the close of business on December 31, 2024? 4. Prepare the journal entry to record the bond retirement.
On January 1, 2024, Whispering Winds Company acquired all the assets and assumed all the liabilities of Carla Vista Company and merged Carla Vista into Whispering Winds. In exchange for the net assets of Carla Vista, Whispering Winds gave its bonds payable with a maturity value of $560,000, a stated interest rate of 10%, interest payable semiannually on June 30 and December 31, a maturity date of January 1, 2034, and a yield rate of 12%. Balance sheets for Whispering Winds and Carla Vista (as well as fair value data) on January 1, 2024, were as follows: Cash Receivables Inventories Land Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation-equipment Total assets Current liabilities Bonds payable, 8% due 1/1/2034, Interest payable 6/30 and 12/31 Common stock, $15 par value Common stock, $5 par value Other contributed capital Retained earnings Total equities Whispering Winds Book Value $253,430 370,350 798,320 644,730 932,090 (321,220) 240,040 (76,870)…
On January 1, 2024, White Water issues $490,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 7% and the bonds issued at $535,061. Required: 1. Using an amortization schedule, show that the bonds have a carrying value of $529,343 on December 31, 2026. (Round your final answers to the nearest whole dollar.)
Flounder Corp. purchased $276,000 of five-year, 7% Hydrocor bonds at 99 on June 30, 2024. Flounder Corp. purchased the bonds to earn interest. Interest is paid semi-annually each June 30 and December 31. The semi-annual amortization amount for the first interest period is $234 determined using the effective-interest method. At December 31, 2024, the bonds were trading at 98. Prepare the required journal entries on June 30 and December 31, 2024. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles (To record receipt of interest.) > (To record fair value adjustment.) Debit Credit
On January 1, 2020, Bramble Corporation issued $5,130,000 of 10% bonds at 102 due December 31, 2029. Bramble paid $81,000 in bond issue costs when the bonds were issue to the market. These will be amortized over the life of the bond. The premium on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable "interest method".) The bonds are callable at 104 (i.e., at 104% of face amount), and on January 2, 2025, Bramble called one-half of the bonds and retired them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Bramble as a result of retiring the $2,565,000 of bonds in 2025. Loss on redemption Prepare the journal entry to record the retirement. (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…

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