On January 1, 20x6, SAM COMPANY. issued 3-year bonds with a face value of P3,000,000 for P2,850,756. The bonds carry an interest of 8% per year payable annually on December 31. On the date of issuance, the company incurred and paid commission to underwriters of P15,000. The bonds are to be properly classified as financial liabilities at fair value through profit or loss. On December 31, 20x6, the bonds are quoted at 103%. Assume that there are no changes due to credit risk. On January 1, 20x7, the bonds are retired at 104%. How much is the interest expense for 20x6?

On January 1, 20x6, SAM COMPANY. issued 3-year bonds with a face value of P3,000,000 for P2,850,756. The bonds carry an interest of 8% per year payable annually on December 31. On the date of issuance, the company incurred and paid commission to underwriters of P15,000. The bonds are to be properly classified as financial liabilities at fair value through profit or loss. On December 31, 20x6, the bonds are quoted at 103%. Assume that there are no changes due to credit risk. On January 1, 20x7, the bonds are retired at 104%. How much is the interest expense for 20x6?

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, Bramble Corp. issued 10 year, S6,000,000, 9% bonds for $6,842,830. The market rate of interest for these bonds is 79%. Interest is payable annually on December 31 (note that these bonds are ANNUAL bonds). Bramble uses the effective-interest method of amortizing bond premium. At the end of the second year, Bramble should report unamortized bond premium of Group of answer choices $722.000 $716,556 5691,933 $319,093
XYZ Corporation issued $20,000,000 of 5 year, 9% bonds on April 1 of the current year at face value, with interest payable semi-annually on April 1 and October 1. The bonds were issued at a market interest rate of 8%, resulting in XYZ Corporation receiving cash of $20,811,020. Journalize the entries to record the following transactions: Issuance of the bonds on April 1 Paid the first semi-annual interest on the bonds on October 1 Is the semi annual interest done as: 20,000,000*9%*1/2 = 4,50,000 or interest Expense Debit 720,000 [(20,000,000 x 9%)/2] Premium on Bonds Payable Debit 27,050 (amortization of premium) Cash Credit 747,050
Kier Company issued $740,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 3-year term to maturity. The bonds have a 5.50% stated rate of interest interest is payable in cash on December 31 each year. Based on this information alone, what are the amounts of interest expense and cash flows from operating activities, respectively, that will be reported in the financial statements for the year ending December 31, Year 1? Multiple Choice O Zero and $40,700 $40,700 and $40,700 Zero and Zero $40,700 and Zero
Diaz Company issued bonds with a face value of $180,000 on January 1, Year 1. The bonds had a stated interest rate of 7 percent and a five-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 98. The straight- line method is used for amortization. Required a. Use a financial statements model 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. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 2 e. Determine the amount of interest expense reported on the Year 2 income statement. Complete…
On April 1, Year 1, Brandi Corporation issued $20,000,000 of 5-year, 9% bondsat a market interest rate of 8%, receiving cash of $20,811;010. Interest ispayable semiannually on April 1 and October 1. Journalize the entries to recordthe following:a. Issuance of the bonds on April 1, Year 1b. First interest payment on October 1, Year 1, and the amortization of bond premium for 2 months, using the straight-line method. how would I do part b since october 1 is 6 months away from april 1 but it says amortization of the bond premium for 2 months?
On January 1, Elias Corporation issued 7% bonds with a face value of $78,000. The bonds are sold for $75,660. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 10 years from now. Elías records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is Oa. $455 Ob. $5,694 Oc. $5,460 Od. $2,340
On January 1 of the current year, Barton Corporation issued 10%, 5-year bonds with a face value of $100,000. The bonds are sold for $95,000. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, 5 years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the current year ended December 31 is a. $11,500 b. $5,000 c. $500 d. $11,000
On January 1 of the current year, Barton Corporation issued 7%, 5-year bonds with a face value of $87,000. The bonds are sold for $82,650. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, 5 years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the current year ended December 31 is Oa. $435 Ob. $6,960 Oc. $3,045 Od. $7,395
Subject: accounting
On January 1, Elias Corporation issued 10% bonds with a face value of $100,000. The bonds are sold for $97,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 10 years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is a. $10,000 b. $3,000 C. $833 d. $10,300
On January 1, Year 1, Victor Company issued bonds with a $750,000 face value, a stated rate of interest of 5%, and a 5-year term to maturity. The bonds sold at 96. Interest is payable in cash on December 31 of each year. Victor uses the straight-line method to amortize bond discounts and premiums. What is the amount of interest expense appearing on the income statement for the year ending December 31, Year 3? Multiple Choice O OOO $36,000 $43,500 $30,000 $37,500
On June 30, Jamison Company issued $2,500,000 of 10-year, 9% bonds, dated June 30, for $2,580,000. Present entries to record the following transactions. Issuance of bonds. (a) Payment of first semiannual interest on December 31 (record separate entry from premium (b) amortization). (C) Amortization by straight-line method of bond premium on December 31.

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