Jep Corporation issued 5%, 10-year bonds with a face value of Euro 500,000 at 108 (a 4% yield) on October 1, 2019. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on an effective- interest basis. Bond interest expense reported on the December 31, 2019 income statement of Jep Corporation would be: a. Euro 10,800. b. Euro 6,250. c. Euro 5,400. d. Euro 6,750. e. None of these answers.

Jep Corporation issued 5%, 10-year bonds with a face value of Euro 500,000 at 108 (a 4% yield) on October 1, 2019. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on an effective- interest basis. Bond interest expense reported on the December 31, 2019 income statement of Jep Corporation would be: a. Euro 10,800. b. Euro 6,250. c. Euro 5,400. d. Euro 6,750. e. None of these answers.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 7P: Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued...

See similar textbooks

Similar questions

Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received $540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium
Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of discount D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of discount
Exercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on January 1, 2020. Interest is paid annually on December 31. The principal and the final interest payment are due on December 31, 2021. Required: Prepare the entry to recognize the issuance of the bonds. Prepare the journal entry for December 31, 2020. Prepare the journal entry to record repayment of the principal on December 31, 2021. CONCEPTUAL CONNECTIONHow would the interest expense for 2020 change if the bonds had been issued at a premium?
Edward Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable semiannually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of discount
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000
On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000 are to be made annually. If the company received proceeds of $112,300, how would the bonds issuance be quoted? A. 1.123 B. 112.30 C. 0.890 D. 89.05
Disclosure of Debt On May 1, 2019, Ramden Company issues 13% bonds with a face value of 2 million. The bond contract calls for retirement of the bonds in periodic installments of 200,000, starting on May 1, 2020, and continuing on each May 1 thereafter until all bonds are retired. Required: How would the preceding information appear in Ramdens balance sheets on December 31, 2019, and 2020?
Brief ExerciseBonds Issued at a Premium (Effective Interest) Refer to the information above for Haley Industries. Required: Prepare the journal entry for December 31, 2022 and 2023. Use the following information for Brief Exercises 9-55 and 9-58: Haley Industries issued $120,000 of 11% , 7-year bonds on January 1, 2020, with $5,842 pre- mium. Interest is paid annually on December 31. The market rate of interest is 10%.