Merchant Company issued 10-year bonds on January 1. The 5% bonds have a face value of $741,000 and pay interest every January 1 and July 1. The bonds were sold for $615,853 based on the market interest rate of 6%. Merchant uses the effective interest rate method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (rounded to the nearest dollar) of Oa. $18,525 Ob. $15,396 Oc. $18,476 Od. $22,230

Merchant Company issued 10-year bonds on January 1. The 5% bonds have a face value of $741,000 and pay interest every January 1 and July 1. The bonds were sold for $615,853 based on the market interest rate of 6%. Merchant uses the effective interest rate method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (rounded to the nearest dollar) of Oa. $18,525 Ob. $15,396 Oc. $18,476 Od. $22,230

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, 2025, Martinez Company issued $1,800,000 face value, 7%, 10-year bonds at $1,932,482. This price resulted in a 6% effective-interest rate on the bonds. Martinez uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1. (a) Prepare the journal entries to record the following transactions. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 125.) 1. 2. 3. 4. No. 1. 2. 3. 4. The issuance of the bonds on January 1, 2025. Accrual of interest and amortization of the premium on December 31, 2025. The payment of interest on January 1, 2026. Accrual of interest and amortization of the premium on December 31, 2026. Date Jan. 1, 2025 Dec. 31, 2025 Jan. 1, 2026 Dec. 31, 2026 Account Titles and…
On January 1, Crane Company issued $5400000, 9% bonds for $5095000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Crane uses the effective-interest method of amortizing bond discount. At the end of the first year, Crane should report unamortized bond discount of $270500. $251000. $254050. $281500.
On January 1, 2018, Parker Company issued bonds with a face value of $63,000, a stated rate of interest of 12 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 14 percent at the time the bonds were issued. The bonds sold for $58,674. Parker used the effective interest rate method to amortize the bond discount cash payment interest expense discount amortization carrying value jan 1 2018 58764 dec 31 2018 7560 8214 654 59329 dec 31 2019 dec 31 2020 dec 31 2021 dec 31 2022 totals 37800 42126 4326
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, Applied Technologies Corporation (ATC) issued $590,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 11 percent. When the bonds were issued, the market interest rate was 11 percent. The bonds pay interest once per year on December 31. Required: 1. Determine the price at which the bonds were issued and the amount that ATC received at issuance. 2. & 3. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31 assuming no interest has been accrued earlier in the year.
On the first day of it's fiscal year, Ebert Co. issued $11,000,000 of 10-year, 7% bonds to finance it's operations. Interest is payable semiannually. The bonds were issued at a market interest rate of 9%, resulting in Ebert receiving cash of $9,569,097. The company uses the interest method. What is the first interest payment on June 30, and second interest payment on Dec. 31 including amortization of discount?
On January 1, Innovative Solutions, Inc., issued $200,000 in bonds at face value. The bonds havea stated interest rate of 6 percent. The bonds mature in 10 years and pay interest once per year onDecember 31.Required:1. Prepare the journal entry to record the bond issuance.2. Prepare the journal entry to record the first interest payment on December 31. Assume nointerest has been accrued earlier in the year.3. Assume the bonds were retired immediately after the first interest payment at a quoted priceof 101. Prepare the journal entry to record the early retirement of the bonds.
. On 1/1/21, Ehrlich Co. issued 4 year bonds with a face value of $700,000. The stated (bond) rate is 8%, payable semiannually on 1/1 and 7/1. The market rate at the time of issuance was 10%. a. Calculate the issue price of the bonds. b. Prepare the journal entry for the issuance of the bonds. c. Complete the amortization table below. Date cash paid interest expense amortization carrying value 1/1/21 7/1/21 1/1/22 7/1/22 d. Prepare the journal entries for the 7/1/21 interest payment and amortization, 12/31/21 interest accrual and amortization, and 1/1/22 interest payment. e. Prepare the journal entry for retirement of the bonds at maturity f. Assume instead that the bonds were redeemed on 7/1/22 at 102. Prepare the journal entry.
On January 1, when the market interest rate was 9 percent, Seton Corporation completed a$200,000, 8 percent bond issue for $187,163. The bonds pay interest each December 31 andmature in 10 years. Seton amortizes the bond discount using the straight-line method.Required:1. Prepare the journal entry to record the bond issuance.2. Prepare the journal entry to record the first interest payment on December 31.3. Prepare a bond discount amortization schedule for these bonds. Round calculations to thenearest dollar.
On January 1, a company issued and sold a $390,000, 4%, 10-year bond payable, and received proceeds of $381,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the second interest payment is:
On January 1, a company issued and sold a $410,000, 4%, 10-year bond payable, and received proceeds of $405,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is: Multiple Choice $404,750. $410,250.
Diaz Company issued bonds with a $149,000 face value on January 1, Year 1. The bonds had a 6 percent stated rate of interest and a 10-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 97. The straight-line method is used for amortization. Required a. Use a financial statements model like the one shown next 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. Note: Use + for increase or for decrease. In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, and FA for financing activity. Not all cells require input. Effect of Transactions on Financial Statements Event Number Assets Balance Sheet Liabilities Income Statement Stockholders' Equity Revenue Expense Net Income Statement of Cash Flows 1. 2.…