Hambelton Ltd. issued $3,300,000 of 5% bonds payable on 1 September 20X9 to yield 4%. Interest on the bonds is paid semi-annuallyand is payable each 28 February and 31 August. The bonds were dated 1 March 20X8, and had an original term of five years. Theaccounting period ends on 31 December. The effective-interest method is used. (PV of $1, PVA of $1, and PVAD of $1.) (Useappropriate factor(s) from the tables provided.)Required:1. Determine the price at which the bonds were issued. (Round time value factor to 5 decimal places. Do not round intermediatecalculations. Round your final answer to the nearest whole dollar amount.)Price of Bond2. Prepare a bond amortization table for the life of the bond. (Round time value factor to 5 decimal places. Do not roundintermediate calculations. Round your final answers to the nearest whole dollar amount. Leave no cells blank - be certain to enter"0" wherever required.)DateOpening1234567InterestPaymentInterestPremiumExpense AmortizationUnamortizedPremiumNet BondLiability

An amortization schedule gives a clear picture of the bond's anticipated cash flows. It helps…

Answered: Hambelton Ltd. issued $3,300,000 of 5%…

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, 20X1, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a contractual interest rate of “LIBOR plus 5.5%,” which is reset annually on January 1 of each year. The LIBOR rates on January 1, 20X1, 20X2, and 20X3, were 6.5%, 7.0%, and 5.5%, respectively. Required: Prepare a journal entry to record the issuance of the bonds on January 1, 20X1, at par. What was the effective (or market) interest rate when the bonds were issued? Prepare a journal entry to record interest expense for 20X1, 20X2, and 20X3. Assume that interest is paid annually on December 31. What is the market value of the debt at December 31, 20X3, assuming Nicks Corporation’s credit risk has not changed.
On January 1, Year 1, Residence Company issued bonds with a $50,000 face value. The bonds were issued at face value. They had a 20 year term and a stated rate of interest of 7%. Which of the following shows how the payoff of the bond liability will affect Residence's financial statements on December 31, Year 20 (the maturity date)? A. B. C. D. Balance Sheet Assets = Liabilities + ΝΑ = ΝΑ + NA = ΝΑ 50,000 50,000 (50,000) = (50,000) = Multiple Choice Option A Option B Option C Option D + + Equity Revenues ΝΑ ΝΑ ΝΑ ΝΑ ΝΑ ΝΑ ΝΑ NA Income Statement Expenses = ΝΑ ΝΑ ΝΑ ΝΑ ||| || || || || = = = = Net Income ΝΑ ΝΑ ΝΑ ΝΑ Statement of Cash Flows (50,000) IA (50,000) IFA 50,000 IA (50,000) FA
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On January 1, Year 1, Twain Corporation sold $620,000 of its own 5 percent, 10-year bonds. Interest is payable annually on December 31. The bonds were sold to yield an effective interest rate of 6 percent. Twain uses the effective interest rate method. The bonds sold for $574,368. Requireda. Prepare the journal entry for the issuance of the bonds.b. Prepare the journal entry for the amortization of the bond discount and the payment of the interest at December 31, Year 1. (Assume effective interest amortization.)c. Prepare the journal entry for the amortization of the bond discount and the payment of interest on December 31, Year 1. (Assume straight-line amortization.)d. Calculate the amount of interest expense for Year 2. (Assume effective interest amortization.) e. Calculate the amount of interest expense for Year 2. (Assume straight-line amortization.)
On January 1 of the current year, Barton Corporation issued 11%, 5-year bonds with a face value of $112,000. The bonds are sold for $106,400. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, 5 years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the current year ended December 31 is a.$560 b.$13,440 c.$14,000 d.$6,160
Franklin corporation issues $84,000, 8%, 5-year bonds on January 1, for $87,780. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to b recognized on July 1 is O a. $3,738 O b. $6,720 Oc. $3.360 d. $2,982
On January 1, $853,000, 5-year, 10% bonds were issued for $827,410. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize a discount on bonds payable, the semiannual amortization amount is a. $42,650 O Ob. $2,559 Oc. $25,590 Od. $5,118
On 31 December 20X7, a company has the following bond on the statement of financial position: Bond payable, 7%, interest due semi-annually on 31 Dec. and 30 June; maturity date, 30 June 20X11 Premium on bonds payable $5,600,000 47,040 $5,647,040
On January 1, Bramble Corp. issued 10 year, S6,000,000, 9% bonds for $6,842,830. The market rate of interest for these bonds is 79%. Interest is payable annually on December 31 (note that these bonds are ANNUAL bonds). Bramble uses the effective-interest method of amortizing bond premium. At the end of the second year, Bramble should report unamortized bond premium of Group of answer choices $722.000 $716,556 5691,933 $319,093
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 20Y1 July 1 Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 20Y1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y2 June 30 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Dec. 31 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y3 June 30 Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the…
Diaz Company issued bonds with a face value of $180,000 on January 1, Year 1. The bonds had a stated interest rate of 7 percent and a five-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 98. The straight- line method is used for amortization. Required a. Use a financial statements model to demonstrate how (1) the January 1, Year 1, bond issue and (2) the December 31, Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financial statements. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 2 e. Determine the amount of interest expense reported on the Year 2 income statement. Complete…
Zee Company sold an issue of $500,000, 9%, 10-year bonds for $468,845 on April 1. The interest is payable semiannually on October 1 and April 1. The market rate of interest at the time the bonds were issued was 10%. Oct. 1 Paid the first semiannual interest payment and amortized the bond discount, using the effective interest method. Dec. 31 Made the adjusting entry for bond interest accrued and amortization of the bond discount from October 1. (Hint: Use the effective interest rate for the three-month period from October 1–December 31.) Jan. 2 Reversed the adjusting entry for bond interest accrued and bond discount amortization as of December 31. Apr. 1 Paid the second semiannual interest payment and amortized the bond discount. Required: Prepare the general journal entry for above transactions (round all amounts to the nearest dollar).

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