JSM Ltd. sold $6,010,000 of 8% bonds, which were dated March 1, 2023, on June 1, 2023. The bonds paid interest on September 1 andMarch 1 of each year. The bonds' maturity date was March 1, 2033, and the bonds were issued to yield 10%. JSM's fiscal year-end wasFebruary 28, and the company followed IFRS.On June 1, 2024, JSM bought back $2,010,000 worth of bonds for $1,910,000 plus accrued interest.(a)Your answer is partially correct.Using 1. a financial calculator, or 2. Excel function PV, calculate the issue price of the bonds and prepare the entry for the issuanceof the bonds. Hint: Use the account Interest Expense in your entry). (Round answer to O decimal places, e.g. 5,275. Credit accounttitles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for theaccount titles and enter O for the amounts. List all debit entries before credit entries.)Account Titles and ExplanationCashDebitCreditInterest ExpenseBonds PayableeTextbook and MediaList of AccountsSave for Later Last saved 1 second ago.Saved work will be auto-submitted on the due date. Auto-submission can take up to 10 minutes.Attempts: 2 of 3 used Submit Answer

To calculate the issue price of the bonds, we need to use the present value (PV) formula. The PV…

Answered: JSM Ltd. sold $6,010,000 of 8% bonds,…

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 February 1, 2018, Cromley Motor Products issued 9% bonds, dated February 1, with a face amount of $80 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $80,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds issued on February 1, 2018. 2-a. Prepare amortization schedules that indicate Cromley's effective interest expense for each interest period during the term to maturity. 2-b. Prepare amortization schedules that indicate Barnwell's effective interest revenue for each interest period during the term to maturity. 3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell's investment on…
On April 1, 2020 Everjoy Company purchased $80,000 of Miller Corporation's 6% bonds at a purchase price of 96. At the time of purchase the market rate of interest was 8%. Everjoy Company, whose year end is December 31, expects to hold the bonds until their maturity date 5 years from the date of purchase. Interest on the bonds will be paid every April 1 and October 1 until maturity. What is the carrying value (amortized cost) of the bond that Everjoy Company would report on October 1, 2020? O $78,144 O $77,120 O $79,488 O $77,472 O None of the above.
pm.100.
McWherter Instruments sold $400 million of 8% bonds, dated January 1, on January 1, 2021. The bonds mature on December 31, 2040 (20 years). For bonds of similar risk and maturity, the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $400,000 of the bonds as a long-term investment. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds issued on January 1, 2021. 2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2021. 3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2021 (at the effective rate). 4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2021 (at the effective rate). Complete this question by entering your answers in the tabs below. Required…
Elm Corporation issued 5-year bonds with a face value of $250,000 on July 1, 2022, in order to fund a plant expansion. The bonds mature on June 30th, 2027, with interest payable on December 31, and June 30. The contract (stated) rate of interest is 10%. When the bonds sold in the marketplace, the market rate of interest was 10.6%. Elm’s fiscal year ends on December 31. 1) At what price were the bonds issued? Prepare the journal entry. What would be the price quote for the bonds? 2) Prepare the journal entry for December 31, 2022. What would the semiannual interest entry be under the straight-line method?
On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 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%. Marigold'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, eg. 52.75.) PV S
On February 1, 2021, Cromley Motor Products issued 10% bonds, dated February 1, with a face amount of $90 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 12%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $90,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. Determine the price of the bonds issued on February 1, 2021.2-a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.2-b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturity.3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on…
On March 1, 2024, Baddour, Incorporated, issued 10% bonds, dated January 1, with a face amount of $160 million. • The bonds were priced at $143.50 million (plus accrued interest) to yield 12%. • The price if issued on January 1 would have been $140.75 million. • Interest is paid semiannually on June 30 and December 31. Baddour's fiscal year ends September 30. Required: 1. to 3. What would be the amount(s) related to the bonds Baddour would report in its balance sheet, income statement and statement of cash flows for the year ended September 30, 2024? Note: Enter your answers in whole dollars. Negative amounts should be indicated by a minus sign. Balance sheet: Bonds payable (net) Interest payable Income statement: Interest expense Statement of cash flows:
Crane Electric sold $6,240,000, 10%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and paid interest annually on January 1. The bonds were sold at 98. At December 31, 2022, $12,480 of the Discount on Bonds Payable account has been amortized. Show the balance sheet presentation of the long-term liability at December 31, 2022. (Enter account name only and do not provide descriptive information.) Crane ElectricBalance Sheet (Partial)choose the accounting period select an opening section name enter a balance sheet item $enter a dollar amount select between addition and deduction : enter a balance sheet item enter a dollar amount $enter a subtotal of the two previous amounts
On January 1, 2026, Baker Company purchased, as an investment, 5% bonds, having a maturity value of $150,000, for $138,400. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2026, and mature January 1, 2036, with interest receivable June 30 and December 31 of each year. The securities are classified as available-for-sale. January 1, 2026 June 30, 2026 December 31, 2026 June 30, 2027 December 31, 2027 June 30, 2028 December 31, 2028 Schedule of Interest Revenue and Bond Amortization Amortization Cash Received (2.5%) Interest Revenue (3.5%) 3,750 3,750 3,750 3,750 3,750 3,750 4,844 4,882 4,922 4,963 5,005 5,049 The fair value of the bonds at December 31 of each year-end is as follows. 2026 145,000 2027 148,000 2028 152,000 1,094 1,132 1,172 1,213 1,255 1,299 Carrying Value 138,400 139,494 140,626 141,798 143,011 144,266 145,565 a) Prepare the journal entry at the date of the investment purchase. b) Prepare the journal entries to record the interest received on…
On January 1, 2025, Crane Company purchased 6% bonds, having a maturity value of $530,000 for $457,971. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2025, and mature January 1, 2035, with interest receivable June 30 and December 31 of each year. Crane Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows. 2025 2026 2027 (a) (b) (c) No. (a) $459,297 454,297 2029 (b) 449,297 (Round answers to O decimal places, e.g. 2,525. 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 2028 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest received and recognition…
Cotton Candy Company purchased $1,500,000 of 10% bonds of Caramel Company on January 1, 2024, paying $1,410,375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. For the year ended December 31, 2024, Cotton Candy Companys income statement will report interest revenue from the Caramel Company bonds of

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