On January 1, Year 1, Victor Company issued bonds with a $250,000 face value, a stated rate of interest of 6%, and a 5-year term to maturity. The bondssold at 95. 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 cash flow from operating activities on the statement of cash flows for the year ending December 31, Year 3?Multiple Choice$15,000$17,500$12,500$14,250

Option a: $15,000 is incorrect because it is the amount of cash paid by the company to its…

Answered: On January 1, Year 1, Victor Company…

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 January 1, Year 1, Residence Company issued bonds with a $50,000 face value. The bonds were issued at face value. They had a 20 year term and a stated rate of interest of 7%. Which of the following shows how the payoff of the bond liability will affect Residence's financial statements on December 31, Year 20 (the maturity date)? A. B. C. D. Balance Sheet Assets = Liabilities + ΝΑ = ΝΑ + NA = ΝΑ 50,000 50,000 (50,000) = (50,000) = Multiple Choice Option A Option B Option C Option D + + Equity Revenues ΝΑ ΝΑ ΝΑ ΝΑ ΝΑ ΝΑ ΝΑ NA Income Statement Expenses = ΝΑ ΝΑ ΝΑ ΝΑ ||| || || || || = = = = Net Income ΝΑ ΝΑ ΝΑ ΝΑ Statement of Cash Flows (50,000) IA (50,000) IFA 50,000 IA (50,000) FA
On January 1, Year 1, Kenneth Cole Inc. issued $2,000,000, 5%, 10-year bonds, with interest payable on June 30, and December 31 to yield 6%. The bonds were issued for $1,851,234. : Given the above information, Prepare the amortization schedule for Year 1 and Year 2 using the effective interest rate method. Use the following format and round figures to nearest dollar. Date Cash Paid Interest Exp Amortization Bond Carrying Value
On July 1, 20Y1, Danzer Industries Inc. issued $48,800,000 of 10-year, 9% bonds at a market (effective) interest rate of 11%, receiving cash of $42,968,258. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.* 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for 20Y1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compute the price of $42,968,258…
1.On January 1, Year 1, Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. Interest is payable in cash on December 31 of each year. Wayne uses the straight-line method to amortize bond discounts and premiums. Assuming Wayne issued the bonds for 102.5, what is the amount of interest expense that will be reported on the income statement for the year ending December 31, Year 1? 2. On January 1, Year 1, Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. Interest is payable in cash on December 31 of each year. Wayne uses the straight-line method to amortize bond discounts and premiums. 2.Assuming Wayne issued the bonds for 102.5, what is the amount of interest expense that will be reported on the income statement for the year ending December 31, Year 1? 3.Perry Corporation was established on January 1, Year 1 when it issued 20,000 shares of $50 par, 5 percent, cumulative…
On July 1, Year 1, Khatri Industries Inc. issued $18,000,000 of 10-year, 5% bonds at a market (effective) interest rate of 6%, receiving cash of $16,661,102. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.* 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar. b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar. 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compute…
Campbell Inc. produces and sells outdoor equipment. On July 1, 20Y1, Campbell issued $40,000,000 of 10- year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $42, 601,480. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. b The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight - line method. 3. Determine the total interest expense for 20Y1. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $42, 601, 480 received for the…
On July 1, 20Y1, Danzer Industries Inc. issued $60,000,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $52,522,704. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. 3. Determine the total interest expense for 20Y1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compute the price of $52,522,704 received for the bonds by using the present…
On January 1, Year 1, Jones Company issued bonds with a $300,000 face value, a stated rate of interest of 7.0%, and a 5-year term to maturity. The bonds were issued at 97. Interest is payable in cash on December 31st of each year. The company amortizes bond discounts and premiums using the straight-line method. What is the amount of interest expense shown on Jones' income statement for the year ending December 31, Year 1? Multiple Choice O O O O $19,200 $21,000 $22,800 $24,600
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 20Y1 July 1 Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 20Y1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y2 June 30 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Dec. 31 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y3 June 30 Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the…
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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…
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