On January 1, 2023, Kristopher Co. issued ten-year bonds with a face value of $7,000,000 and a statedinterest rate of 5%, payable semiannually on June 30 and December 31. The bonds were sold to yield4%. Required: a. Calculate the issue price of the bonds. b. Prepare journal entries for the issuance onJanuary 1, 2023 and the June 30, 2023 interest payment date, assuming the company uses the effectiveinterest method for amortizing any premium or discount. calculate in excel format calculate the issue priceof bonds

A bond is a financial instrument or debt security that is used to symbolize a loan that an investor…

Answered: On January 1, 2023, Kristopher Co.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, 2021, Daniel Corp. issued $500,000 of 10-year, 8% bonds for $385,298, yielding a market (discount, yield) rate of 12% per year. Interest is paid semi-annually on June 30 and December 31. Daniel uses the effective interest rate method to account for bonds. Required: a. Prepare JEs to record the issue on Jan. 1, 2021. Include the Discount on B/P b. What interest expense is reported on I/S for year ending December 31,2021? C. On December 31, 2029, after paying the December 31 interest (Coupon), Daniel Corp retires the bonds for $486,153. Determine the gain/loss on bonds retirement and prepare journal entries to record the retirement. Include the unamortized bond discount. d. Ignore (b) and suppose that on December 31, 2029, the yield decreases from 12% to 10% per year. What is the present value of the remaining cash flows of the bonds?
When Patey Pontoons issued 4% bonds on January 1, 2024, with a face amount of $660,000, the market yield for bonds of similar risk and maturity was 5%. The bonds mature December 31, 2027 (4 years). Interest is paid semiannually on June 30 and December 31. Required: Determine the price of the bonds at January 1, 2024. Prepare the journal entry to record their issuance by Patey on January 1, 2024. Prepare an amortization schedule that determines interest at the effective rate each period. Prepare the journal entry to record interest on June 30, 2024. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2024? What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2024? (Ignore income taxes.) Prepare the appropriate journal entries at maturity on December 31, 2027. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of S1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of…
Laudie Company issued $400,000 of 5%, 10-year bonds on January 1, 2020, at 94. Interest is payable annually on January 1, 2021. Instructions: Prepare the journal entries to record the following events. a. The issuance of the bonds. b. The accrual of interest and amortization of the discount on December 31, 2020. c. The payment of interest on January 1, 2021. d. Calculate the carrying value of the bond on 12/31/20. #2 Gridley Company issued $800,000, 11%, 10-year bonds on December 31, 2019, at 104. Interest is payable annually on December 31. Gridley Company uses the straight-line method to amortize bond premium or discount. Instructions: Prepare the journal entries to record the following. a. The issuance of the bonds. b. The payment of interest December 31, 2020. (Extra credit for amortization of the premium entry) c. The redemption of the bond at maturity
On April 1, 2020, Quicke Mart issued $1,000,000, 9% bonds at par plus accrued interest dated January 1, 2020. Interest is payable semi-annually on January 1 and July 1. The bonds mature on January 1, 2027. Required: Prepare journal entries to record the following transactions related to long-term bonds of Quicke Mart: 1. The issuance of the bonds. 2. The first interest payments.
Hillside issues $1,900,000 of 5%, 15-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,641,812. Required: 1. Prepare the January 1 journal entry to record the bonds’ issuance. 2(a) For each semiannual period, complete the table below to calculate the cash payment. 2(b) For each semiannual period, complete the table below to calculate the straight-line discount amortization. 2(c) For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of a straight-line amortization table. 5. Prepare the journal entries to record the first two interest payments.
On January 1, 2018, Lane Unlimited issues 15%, 10-year bonds payable with a face value of $180,000. The bonds are issued at 105 and pay interest on June 30 and December 31. Requirements: Journalize the semiannual interest payment and amortization of bond premium on December 31, 2018. Journalize the retirement of the bond at maturity, assuming the last interest payment has already been recorded. (Give the date.)
On January 1, 2022, Eleanor Co. issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. Required: Calculate the issue price of the bonds if the market interest rate is 4%. Calculate the issue price of the bonds if the market interest rate is 8%.
Sheffield Company issued $400,000, 12%, 10-year bonds on January 1, 2022, for $423,557. This price resulted in an effective-interest rate of 11% on the bonds. Interest is payable annually on January 1. Sheffield uses the effective-interest method to amortize bond premium or discount. (a) Your answer is correct. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (b) Date Jan. 1, 2022 Account Titles and Explanation Cash Premium on Bonds Payable eTextbook and Media Date Bonds Payable List of Accounts Dec. 31, 2022 Your answer is partially correct. Account Titles and Explanation Interest Expense Premium on Bonds Payable Debit Prepare the journal entry to record the accrual of interest and the premium amortization on December 31, 2022. (Round answers to O decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.)…
On January 1, 2024, Instaform, Incorporated, issued 12% bonds with a face amount of $65 million, dated January 1. The bonds mature in 2043 (20 years). The market yield for bonds of similar risk and maturity is 14%. Interest is paid semiannually. Required: 1-a. Determine the price of the bonds at January 1, 2024. 1-b. Prepare the journal entry to record their issuance by Instaform. 2-a. Assume the market rate was 11%. Determine the price of the bonds at January 1, 2024. 2-b. Assume the market rate was 11%. Prepare the journal entry to record their issuance by Instaform. 3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt.
Ellis Company issues 6.5%, five-year bonds dated January 1, 2021, with a $250,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $255,333. The annual market rate is 6% on the issue date. Required: 1. Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments.
On January 1, 2018, for $17.4 million, Cenotaph Company purchased 8% bonds, dated January 1, 2018, with a face amount of $19.4 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. Required: 1. Prepare the journal entry to record interest on June 30, 2018, using the effective interest method. 2. Prepare the journal entry to record interest on December 31, 2018, using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry to record interest on June 30, 2018, using the effective interest method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet 1 > Record the entry to interest on June 30, 2018, using the effective interest method. Note: Enter debits before credits. Date General…
On March 1, 2020, Quinto Mining Inc. issued a $690,000, 8%, three-year bond. Interest is payable semiannually beginning September 1, 2020. 1. Calculate the bond issue price assuming a market interest rate of 7% on the date of issue 2. Using the effective interest method, prepare an amortization schedule. (Image attached) 3. Record the entries for the issuance of the bond on March 1, the adjusting entry to accrue bond interest and related amortization on April 30, 2020, Quinto’s year-end, and the payment of interest on September 1, 2020. Record the issuance of bond Record accrual of interest on bond Record payment of interest

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