Items 1 to 4 are based on the following information. On December 31, 2020, Fuslie Company issued P5,000,000 face amount, 5-year bonds at 109. Each P1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of P100 par value at P120. Immediately after issuance, the market value of each warrant was P5. The stated interest rate on the bonds is 11% payable annually, every December 31. However, the prevailing market rate of interest for similar bonds without warrants is 12%. Note: Round-off present value factors to two (2) decimal places.

Items 1 to 4 are based on the following information. On December 31, 2020, Fuslie Company issued P5,000,000 face amount, 5-year bonds at 109. Each P1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of P100 par value at P120. Immediately after issuance, the market value of each warrant was P5. The stated interest rate on the bonds is 11% payable annually, every December 31. However, the prevailing market rate of interest for similar bonds without warrants is 12%. Note: Round-off present value factors to two (2) decimal places.

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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A $515,000 bond issue on which there is an unamortized discount of $36,000 is redeemed for $463,000. Journalize the redemption of the bonds. If an amount box does not require an entry, leave it blank.
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b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Receivable 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $23,854,460 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bonds
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5. What is the carrying amount of the bonds payable on January 1,2020? A. 5,000,000 B. 4,750,000 C. 5,150,000 D. 4,550,000 E. None of the above
Enumerate the following; 32. Provides for recognition of an equal amount of premium or discount amortization each period. 33. Bonds that mature in one lump sum at a specified future date. 34. Bonds that provide for conversion into some other security at the option of the stockholder. 35. Bonds that mature in a series of installments at future dates. 36. The difference between the face value and the sales price when bonds are sold below their face value. 37. Bonds for which assets are pledged to guarantee repayment. 38. Obligations that are not expected to be paid in cash within one year or the normal operating cycle. 39. Bonds that do not bear interest but instead are sold at significant discounts providing the investor with a total interest payoff at maturity. 40. Costs incurred by the issuer for legal services, printing and engraving, taxes, and underwriting in connection with the sale of a…
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H1.
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