Markel Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has not changed. Markel elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?
Q: Grocery Corporation received $300,328 for 11 percent bonds issued on January 1, 2021, at a market…
A: Bonds are a type of borrowing in which the issuer accepts cash from bondholders in exchange for a…
Q: On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a…
A: The bonds are issued at premium when the market interest is lower than the stated rate of bonds.
Q: On January 1, 2021, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302.…
A: Given information is: On January 1, 2021, Essence Communications issued $800,000 of its 10-year, 8%…
Q: On January 1 of this year, Barnett Corporation sold bonds with a face value of $510,000 and a coupon…
A: The bond bonds sell at face value when the coupon rate and interest rate offered in the market are…
Q: On July 1, 2018, McNamara Company issued for $598,964, 10%, 20-year bonds with a face value of…
A: When bonds are issued at premium the premium on bonds payable is amortized over the life of the…
Q: inson Corporation issued $600,000 of 7%, 10-year bonds payable on March 31, 2022. The market…
A: Bonds are a type of loan that is, obtained by company in exchange of predetermined rate of interest…
Q: Cash Effective Decrease in Outstanding Date interest interest balance balance 1/1/2021 $ 207,020…
A: Formula: Effective Int rate = Interest / Outstanding balance x 100
Q: On January 1 of this year, the carrying value of XYZ Inc's bonds was $750,590. The face value of…
A: Carrying value of bonds = $ 750590 Face value of bonds = $ 760000 Gain or loss on redemption of…
Q: On January 1, 2021, NFB Visual Aids issued $800,000 of its 20-year, 8% bonds. The bonds were priced…
A: 1.
Q: Prepare the journal entry to recognize the impairment. (List debit entry before credit entry. Credit…
A: Journal entries are made to record the transactions as the first process in the books of accounts…
Q: Metlock, Inc. issued $282,000, 7%, 15-year bonds on December 31, 2021, for $253,800. Interest is…
A: Total discount on bonds = Face value of bonds - issue value of bonds = 282000-253800 = $28,200
Q: Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds:…
A: Bonds are debt instruments issued by organizations to raise funds to meet various requirements. The…
Q: Simko Company issued $670,000, 10-year, 4 percent bonds on January 1, 2021. The bonds were issued…
A: When, the debentures are issued at less than par value, it is has been issued at discount. The…
Q: On March 1, 2021, Brown-Ferring Corporation issued $100.0 million of 15% bonds, dated January 1,…
A: Accrued Interest- In accounting, accrued interest refers to the sum of interest that has been…
Q: On June 1, 2019, Swifty Company sold $2,460,000 in long-term bonds for $2,157,700. The bonds will…
A: Interest payment = $2,460,000*8% Interest payment = $196,800
Q: Grocery Corporation received $330,654 for 9.50 percent bonds issued on January 1, 2021, at a market…
A: Bonds can be bought and sold on the bond market, which is a marketplace where investors and traders…
Q: The situations presented here are independent of each other. For each situation, prepare the…
A: given that, face value of bonds redeemed = $168000 rate if interest = 14.5% carrying value of the…
Q: 1a) What was the issue price on January 1 of this year? 1b) What amount of interest expense should…
A: Price of bond is the present value of coupon payment and present value of par value of bond taken on…
Q: On January 1, Year 1, Wayne Company issued bonds with a face value of $635,000, a 5% stated rate of…
A: Income statement is prepared with a view to ascertain the earnings of an entity over a specific…
Q: At the beginning of the current year, two bond issues (Simmons Industries 7%, 20-year bonds and…
A: Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money…
Q: At the beginning of the current year, two bond issues (Simmons Industries 7%, 20-year bonds and…
A: Bonds are the financial instruments issued by an entity to raise funds for a particular period of…
Q: On January 1, 2024, NFB Visual Aids issued $900,000 of its 20-year, 6% bonds. The bonds were priced…
A: Journalizing is one of the most important and basic steps in the accounting cycle. Journalizing is…
Q: On January 1, 2018, Surreal Manufacturing issued 560 bonds, each with a face value of $1,000, a…
A: Cash Interest=Face Value×Interest rate=$560,000×3%=$16,800
Q: Vaughn Corporation has municipal bonds classified as a held-to-maturity at December 31, 2020. These…
A: Impairment: This exists when the Fair value or the FV of an asset is below or lower than the…
Q: Ivanhoe Corporation has municipal bonds classified as a held-to-maturity at December 31, 2025. These…
A: Journal entries are made to record the transactions as the first process in the books of accounts…
Q: On January 1, 2020, Swifty Corporation issued $450,000 of 7% bonds, due in 8 years. The bonds were…
A: Introduction:- The act of recording or keeping track of any financial or non-financial action is…
Q: Presented below is selected information related to the financial instruments of Novak Company at…
A: At reporting date all financial assets are valued at fair value.Fair value adjustment Gain/(loss) =…
Q: Net Work Corporation, whose annual accounting period ends on December 31, issued the following…
A: Bonds payable are one of the sources of finance and are shown as liability. If the interest rate is…
Q: On January 1, 2024, Tennessee Harvester Corporation issued debenture bonds that pay interest…
A: The given data in the question can be summarised as follows:The required values can be calculated…
Q: The notes to the Thorson Ltd. financial statements reported the following data on December 31, Year…
A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…
Q: Sheffield Company issued $400,000, 12%, 10-year bonds on January 1, 2022, for $423,557. This price…
A: Lets understand the basics.There are two methods through which amortization of bond premium or…
Q: Assume that market interest rates were slightly lower than 15% when the bonds were sold. Would the…
A: Bonds refer to high-security debt instruments that enable an entity to raise funds and fulfill…
Q: Grocery Corporation received $301,001 for 13.50 percent bonds issued on January 1, 2021, at a market…
A: Introduction If stated interest rate on bonds is higher than the market rate of interest then such…
Q: On March 1, 2021, Navy Corporation used excess cash to purchase U.S. Treasury bonds for $103,000…
A: U.S. Treasury bonds are debt securities issued by the United States Department of the Treasury to…
Q: Hagar Corporation has municipal bonds classified as a held-to-maturity at December 31, 2020. These…
A: a. Prepare the journal entry to recognize the impairment. Date Account titles and Explanation…
Q: Record entry to adjust the bonds to their fair value for presentation in the December 31, 2024,…
A: Bonds are high-security debt instruments that give an organization the ability to acquire money and…
Q: On May 1, 2024, Green Corporation issued $1,200,000 of 8% bonds, dated January 1, 2024, for…
A: A bond is a source of finance. Usually,Usually companies and governments issue bonds to the public.…
Q: On January 1, 2023, Systems Corporation issues $60,000 of 7%, 15-year bonds, with interest payable…
A: The question is based on the concept of Financial Accounting. Bonds comes under the definition of…
Q: On January 1, 2021, Laura Company purchased $930,000 of 10% bonds at face value. Interest is payable…
A: Journal entry is a process of recording the business transactions in the books of accounts for the…
Q: Kingbird, Inc. issued $430,000 of 5-year, 7% bonds at 97 on January 1, 2020. The bonds pay interest…
A: Introduction: Journals: Recording of a business transactions in a chronological order. First step in…
Q: On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a…
A: Journal entry is a primary entry that records the financial transactions initially.
Q: On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured…
A: Bond price is the current market value of a bond, determined by discounting all its future cash…
Q: On January 1, 2021, Rapid Airlines issued $275 million of its 10% bonds for $254 million. The bonds…
A: Bonds payable is a type of instrument where by an amount is borrowed for a fixed period with fixed…
Q: At January 1, 2020, Konerko Corp. issued $40,000,000 of 6%, 12-year bonds that paid interest…
A: Bonds: It is also known as fixed-income security, is a debt instrument created for the purpose of…
Q: On January 1, 2024, Tennessee Harvester Corporation issued debenture bonds that pay interest…
A: The objective of the question is to determine various aspects of the bond issuance by Tennessee…
Q: Grocery Corporation received $300,328 for 11 percent bonds issued on January 1, 2021, at a market…
A: A method for amortizing bonds that are used to display the actual rate of interest that is applied…
Markel Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has not changed. Markel elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- On January 1, 2020 a company purchases bonds as an investment. The company does not have the intent or ability to hold the bonds to maturity and is not in the business of trading investment securities. The bonds have a face value of $150,000, a stated rate of 8.0% and were purchased for $145,000. Interest is payable semiannually on June 30 and December 31 and the bonds mature on December 31, 2024. The company uses the straight line method to amortize any related premium or discount. On December 31, 2020 the bonds have a fair value of $148,000. The bonds are sold on July 1, 2021 for $149,000 (the interest payment received on June 30, 2021 was properly recorded). Required: Provide the journal entries for: acquisition, the first interest payment, the year-end adjustment at 12/31/20, and for the sale on 7/1/21.On January 1, 2021, Solo Inc. issued 1,300 of its 8%, $1,000 bonds at 97.7. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2031. Solo paid $51,000 in bond issue costs. Solo uses straight-line amortization. What is the carrying value of the bonds reported in the December 31, 2021, balance sheet?Jacobs Company issued bonds with a $168,000 face value on January 1, Year 1. The bonds were issued at 105 and carried a 5-year term to maturity. They had a 9% stated rate of interest that was payable in cash on December 31st of each year. Jacobs uses the straight-line method to amortize bond discounts and premiums. Based on this information alone, how does the recognition of interest expense during Year 1 affect the company's accounting equation? Multiple Choice Decreases both assets and stockholders' equity by $13,440 Decreases stockholders' equity by $13,440, decreases liabilities $1,680, and decreases assets by $15,120 Increases liabilities by $1,680, decreases assets by $13,440, and decreases stockholders' equity by $15,120 Decreases both assets and stockholders' equity by $15,120
- On January 1, 2021, Rapid Airlines issued $200 million of its 8% bonds for $184 million. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $188 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates.Required:1. Prepare the journal entry to record interest on June 30, 2021 (the first interest payment).2. Prepare the journal entry to record interest on December 31, 2021 (the second interest payment).3. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2021,balance sheet.On January 1, 2021, Essence Communications issued $700,000 of its 10-year, 10% bonds for $619,711. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. Essence Communications records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the market interest rate for bonds of similar risk and maturity was 11%. The bonds are not traded on an active exchange. The decrease in the market interest rate was due to a 1% decrease In general (risk-free) interest rates. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Using the information provided, estimate the fair value of the bonds at December 31, 2021. 2. to 4. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the second Interest payment) and to adjust the bonds to their fair value…On January 1, 2024, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: Payment Cash Payment Effective Interest Increase in Balance Outstanding Balance 6,627,273 1 320,000 331,364 11,364 6,638,637 2 320,000 331,932 11,932 6,650,569 3 320,000 332,528 12,528 6,663,097 4 320,000 333,155 13,155 6,676,252 5 320,000 333,813 13,813 6,690,065 6 320,000 334,503 14,503 6,704,568 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 38 320,000 389,107 69,107 7,851,247 39 320,000 392,562 72,562 7,923,809 40 320,000 396,191 76,191 8,000,000 Required: What is the face amount of the bonds? What is the initial selling price of the bonds? What is the term to maturity in years? Interest is determined by what approach? What is the stated annual interest rate? What is the effective annual interest rate? What is the total cash interest paid over the term to maturity?…
- On January 1, 2021, Rapid Airlines issued $225 million of its 8% bonds for $207 million. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $213 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates. Required: 1. to 3. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the second interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)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,…Image
- Riverbed Company issued $2,690,000, 9%, 20-year bonds on January 1, 2020, at 105. Interest is payable annually on January 1. Riverbed uses straight-line amortization for bond premium or discount. Prepare the journal entries to record the following events. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The accrual of interest and the premium amortization on December 31, 2020. (c) The payment of interest on January 1, 2021. (d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. Date Account Titles and Explanation Debit Credit > >Crawford Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has risen. Crawford elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?On December 31, Lujack Company held the following short-term available-for-sale securities. Lujack had no short- term investments prior to the current period. Prepare the December 31 year-end adjusting entry to record the fair value adjustment for these debt securities. Complete this question by entering your answers in the tabs below. General Journal Fair Value Adjustment Computation of fair value adjustment. Available-for-Sale Securities Nintendo Company notes Atlantic bonds Kellogg Company notes McDonald's Corporation bonds Totals Computation of Fair Value Adjustment $ Cost Fair Value 50,100 $ 54,609 18,637 33,908 20,040 36,072 67,635 64,253 $ 173,847 $ 171,407 Fair Value Adjustment Unrealized Amount General Journal Gain or Loss? >