On March 15, 2022, Red Company issued itsfinancial statements. Its fiscal year ends atDecember 31, 2021. On January 11, 2022, Redissued 10,000 20-year bonds for $20,000,000.Face value per bond equals $1,000. Statedinterest rate equals 5%. On March 2, 2022, dueto the unexpected economic downturn, Red'saccountant re-estimated the accounts receivableto have an ending balance of $15,250,000,which was previously recorded at $16,250,000on December 31, 2021. Please discuss how thepreceding subsequent events should bereflected in the 2021 financial statements.

Red Company Bonds issued after the balance sheet is a common occurrence that requires no disclosure…

On March 15, 2022, Red Company issue financial statements. Its fiscal year ends December 31, 2021. On January 11, 2022 issued 10,000 20-year bonds for $20,00 Face value per bond equals $1,000. Stat interest rate equals 5%. On March 2, 202

On March 15, 2022, Red Company issue financial statements. Its fiscal year ends December 31, 2021. On January 11, 2022 issued 10,000 20-year bonds for $20,00 Face value per bond equals $1,000. Stat interest rate equals 5%. On March 2, 202

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: On January 1, 2021, Baddour, Inc., issued 10% bonds with a face amount of $160 million. The bonds…

A: Requirement 1:

Q: E-Tech Initiatives Limited plans to issue $450,000, 10-year, 5 percent bonds. Interest is payable…

A: Formula: Discount amount = Bond value x Discount rate

Q: On January 1, 2018, Quinton Corporation issued 8% bonds with a face value of $100,000. The bonds are…

Q: Mellilo Corporation issued $4.4 million of 20-year, 9.5 percent bonds on July 1, 2021, at 98.…

A: Journal entry is the first stage of accounting process. Journal entry used to record business…

Q: On January 1, 2019, Drennen Inc. issued $5 million face amount of 10-year, 14% stated rate bonds…

A: Given: Face value= $5,000,000 i (Stated interest rate) = 14% n (Time period)= 10 x 2 = 20 Market…

Q: On January 1, 2021, PRANCER Company was authorized to issue 12% bonds with a face amount of…

A: Bond Issue Bond is an instrument which was issued by the federal authority which was used by the…

Q: Provide the journal entry that Bella will make to record the second bond interest payment on…

A: Meaning of Bonds Bonds are fixed debt instruments where a company issues bonds to the lenders. The…

Q: On November 1, 2021, Mason Company issued P8,000,000 of its 10 year, 8% term bonds dated October 1,…

A: Total discount on issue of bonds = Face value of bonds - issue value of bonds = P8,000,000 -…

Q: In the statement of financial position of Leblanc Company as of December 31, 2020, the following…

A: Redemption of the bonds = Face value of Bonds Payable x Redemption value / 100 = P1,000,000 x 98/100…

Q: company issues $25,000,000, 7.8%, 20-year bonds to yield (market) 8% on January 1, 2020. Interest is…

A: Here the bonds having coupon rate 7.8% are issued to yield at 8% Thus represents that bonds are…

Q: Jashanpreet Industries Limited (JIL) issued $1,800,000, 8%, 20-year bonds on January 1, 2021 and…

A: JOURNAL ENTRIES FOR JIL DURING 2021 DATE…

Q: On July 1, 2022, Mercurial Company issued at 98 plus accrued interest 2,500 of its 11%, P1,000 face…

A: Solution : Given Face value of bond =P1000 Issue price =98%…

Q: on april 1, 2019 franville corporation issued, at 98 plus accrued interest, 400 of its 105, $1000…

A: Number of bonds = 400 Face value of bonds = $1,000 The bonds issued at a 98% discount Interest on…

Q: Pretzelmania, Inc., issues 5%, 10-year bonds with a face amount of $59,000 for $59,000 on January 1,…

A: Bonds payable are one of the sources of finance and is shown as liability. If the interest rate is…

Q: Dok int ences E-Tech Initiatives Limited plans to issue $640,000, 10-year, 6.50 percent bonds.…

A: Issuing bonds at a premium occurs when a company sells its bonds to investors at a price exceeding…

Q: Martinez Ltd. issued a $1,060,000, 10-year bond at par on January 1, 2023. The bond paid 10%…

A: Journal entry is required to make to record event and transaction that are occured during particular…

Q: Xonic Corporation issued $8.4 million of 20-year, 8 percent bonds on April 1, 2024, at 102. Interest…

A: Bonds payable is a type of instrument where by an amount is borrowed for a fixed period with fixed…

Q: Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds:…

A: Bond is a form of debt used by the entity to raise money for various purposes such as operations,…

Q: E-Tech Initiatives Limited plans to issue $400,000, 10-year, 4 percent bonds. Interest is payable…

A: Carrying value is an accounting measure of value in which the value of an asset or company is based…

Q: Sheridan Company has issued three different bonds during 2022. Interest is payable annually on each…

A: Introduction: The term journal refers to a 'book' or 'diary,' and entry implies writing anything…

Q: On January 1, 2021, PRANCER Company was authorized to issue 12% bonds with a face amount of…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: On November 1, 2018, Sigma Inc. invests in $1,000,000 of 5%, 10-year bondsissued by Microsoft…

A: Correct Option is “a”: Interest Revenue. After Investing in November 2018, the interest revenue will…

Q: N. Chocolate Company was authorized to issue 12% bonds with face amount of P5,000,000 on April 1,…

A: Solution: Net cash received from issuance of bond = Proceed from issue of Bond - bond issue cost

Q: Windsor, Inc. has issued three different bonds during 2019. Interest is payable annually on each of…

A: Bonds payable are one of the sources of finance and are shown as liability. If the interest rate is…

Q: E-Tech Initiatives Limited plans to issue $550,000, 10-year, 3 percent bonds. Interest is payable…

A: The bonds have a face value of $500,000 and are issued at 95% of the face value.Issue Price = Face…

Q: E-Tech Initiatives Limited plans to issue $450,000, 10-year, 4 percent bonds. Interest is payable…

A: Bonds Payable issued at discount - Bonds payable is the obligation of the company to be paid at the…

Q: E-Tech Initiatives Limited plans to issue $400,000, 10-year, 4 percent bonds. Interest is payable…

A: Carrying value is an accounting measure of value in which the value of an asset or company is based…

Q: prepare the journal entry to record the sale of these bonds on January 1, 2022. Crane Company issues…

A: >Bonds Payable are the source of finance for the companies.>The bondholders are entitled for a…

Q: Accounting ABC Corporation issued $100,000 of 5% bonds on January 1, 2023, with interest payable…

A: Interest expense refers to the cost of borrowing money over a specific period. It represents the…

Q: Pretzelmania, Incorporated, issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on…

A: Bonds Payable is documentary evidence given by the payer to the payee This act as a promissory note…

Q: Pharoah Company issued $380,000 of 6%, 20-year bonds on January 1, 2022, at face value. Interest is…

A: Given, Pharoah Company issued $380,000 of 6%, 20-year bonds on January 1, 2022, at face value.…

Q: National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January…

A: As posted multiple sub parts in questions we are answering only first 3 sub parts kindly repost the…

Q: On January 1, 2021, Solo Inc. issued 1,000 of its 8%, $1,000 bonds at 98. Interest is payable…

A: In this question we have been asked to calculate the carrying value of the bond, for which we have…

Q: On January 1, 2015, a company issues 5-year bonds with a stated interest rate of 6% and records the…

A: Interest payable on January 1 = Face value of bonds x rate of interest x 6/12 = $500000 x 6% x 6/12…

Q: Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $67,000 for $73,507 on January 1,…

A: Given that, rate of interest on bonds = 7% term of the bond = 15years Face value of bonds $67000…

Q: Xonic Corporation issued $7.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest…

A: Bonds Payable: Bonds payable is the source of finance for the company, when a company needs funds…

Q: On January 1, 2021, Lambda, Inc. issued ten-year bonds with a face value of $1,000,000 and an annual…

A: Bonds issued at discount: Bonds are said to be issued at discount if the issue price is less than…

Q: Frozen Company issues $34,800 of ten year bonds on January 1, 2020 at 108. It uses the straight line…

A: Written reports on a company's financial performance are known as financial statements. They…

Q: On January 1, 2024, Baddour, Incorporated, issued 10%, 12-year bonds with a face amount of $176…

A: Financial reporting related to bonds involves disclosing essential information about a company's…

Q: On August 1, 2021, Space Company issued at 97 plus accrued interest, 2,500 of its 12%, P1,000 bonds.…

A: Formula: Cash received on the issue of bonds= Face value of bond x Issue rate of bonds.

Q: Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $76,799 on January 1,…

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.…

Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

On March 15, 2022, Red Company issued its
financial statements. Its fiscal year ends at
December 31, 2021. On January 11, 2022, Red
issued 10,000 20-year bonds for $20,000,000.
Face value per bond equals $1,000. Stated
interest rate equals 5%. On March 2, 2022, due
to the unexpected economic downturn, Red's
accountant re-estimated the accounts receivable
to have an ending balance of $15,250,000,
which was previously recorded at $16,250,000
on December 31, 2021. Please discuss how the
preceding subsequent events should be
reflected in the 2021 financial statements.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

On August 31, 2021, DASHER Company issued at 104 plus accrued interest, three thousand 10% bonds with a face amount of ₱1,000 per bond. The bonds are dated April 1, 2021, mature on March 31, 2026, and pay interest every April 1 and October 1. The bonds were issued through an underwriter to whom the entity paid bond issue cost of ₱120,000. 1. Prepare all necessary journal entries for the calendar year 2021. 2. How much is the interest paid for the year ended December 31, 2021? 3. How much is the carrying value of the bond on December 31, 2021?
Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid annually on December 31. 1. Record the bond issue. 2. Record the first interest payment on December 31, 2021.
Marigold Corp. issued 3, 300 7%, 5-year, $1,000 bonds dated January 1, 2022, at face value. interest is paid each january 1. Prepare the journal entry to record the sale of these bonds on January 1, 2022.
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?
On January 1, 2021, Splash City issues $400,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year.Assuming the market interest rate on the issue date is 9%, the bonds will issue at $367,422. Exercise 9-8A Part 2 2. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your intermediate and final answers to the nearest whole dollar.)
The following section is taken from Ohlman Ltd.'s. statement of financial position at December 31, 2018. Non‐current liabilities Bonds payable, 7%, due January 1, 2024 $16,000,000 Current liabilities Interest payable 1,120,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. Prepare the entry to record the accrual of interest on December 31, 2019.
Carla Vista Corporation issued 2,800, 6%, 5-year, $1,000 bonds dated January 1, 2022, at 100. Interest is paid each January 1.(a)Prepare the journal entry to record the sale of these bonds on January 1, 2022. (b)Prepare the adjusting journal entry on December 31, 2022, to record interest expense
During 2018 and 2019, Kale Co. completed the following transactions relating to its bond issue. The company’s fiscal year ends on December 31. 2018 Mar. 1 Issued $330,000 of 10 year, 7 percent bonds for $318,000. The semiannual cash payment for interest is due on March 1 and September 1, beginning September 2018. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. 2019 Mar. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. Required Prepare the liabilities section of the balance sheet at…
Determine the bond issue proceeds for each of the following bonds payable. All bonds are issued on January 1, 2023. a. Brandy Corporation issued bonds in the amount of $1,290,000 that will be paid in 3 years. Interest of $38,700 is payable semiannually each June 30 and December 31 with the first interest payment at the end of the first period on June 30, 2023. If the market rate of interest is 10%, what is the amount of the bond issue proceeds? (Use the present value and future value tables, a financial calculator, or a spreadsheet for your calculations. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. Round your final answer to the nearest cent, $X.XX.) B. Tandy Corporation issued bonds in the amount of $4,400,000 that will be paid in nine years. Interest of $132,000 is payable semiannually each June 30 and December 31 with the first interest payment at the end of the first period on June 30,…
E-Tech Initiatives Limited plans to issue $630,000, 10-year, 6.00 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds would be reported on the January 2, 2019, balance sheet if they are issued at 103. E-TECH INITIATIVES LIMITED Balance Sheet (partial) As of January 2, 2019 Carrying Value 0
On November 1, 2021, Mason Company issued P8,000,000 of its 10 year, 8% term bonds dated October 1, 2021. The bonds were sold to yield 10% with total proceeds of P7,000,000 plus accrued interest. Interest is paid every February 1 and August 1. Mason Company reports on a fiscal year ending every July 31 and amortizes premiums, discounts and bond issue costs using the straight line method. What interest expense relating to the bonds would be recognized by Mason in its income statement for the period ending July 31, 2022?
On February 1, 2021, Sanford & Son issued 12% bonds dated February 1, 2021, with a face amount of $110,000. The bonds sold for $128,876 and mature in 20 years. The effective interest rate for these bonds was 10%. Interest is paid semiannually on July 31 and January 31. Sanford & Son's fiscal year is the calendar year. Required:1. Prepare the journal entry to record the bond issuance on February 1, 2021.2. Prepare the entry to record interest on July 31, 2021, using the straight-line method.3. Prepare the necessary journal entry on December 31, 2021.4. Prepare the necessary journal entry on January 31, 2022.