Present Value of $1 PV of Annuity of $1 Issuance of a Bond at Face Value On January 1, 2017, Whitefeather Industries issued 900, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar. Required: 1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar. $ Identify and analyze the effect of the issuance of the bonds on January 1, 2017. Activity Financing Accounts Cash Increase, Bonds Payable Increase Statement(s) Balance Sheet only How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders' Net Assets = Liabilities + Equity Revenues – Expenses = Income Cash Bonds Payable No Entry No Entry 2. How would the issue price have been affected if the market rate of interest had been higher than 10%. Bonds would be issued at a discount. A premium or discount represents the difference between the face value and the issuance price of the bond. Bonds are issued at a discount when the market rate of interest exceeds the face rate. The discount on the bond equals the face value less issue price. Bonds are issued at a premium when the face rate exceeds the market rate. The premium on the bond equals the issue price less face value. 3. Identify and analyze the effect of the payment of interest on July 1, 2017. Activity Operating Accounts Cash Decrease, Interest Expense Increase Statement(s) Balance Sheet and Income Statement Identify and analyze the transaction by using the following steps: 1. Determine activity – operating, investing or financing. 2. Determine accounts affected and the amount of increases/decreases. 3. Determine the financial statements affected – balance sheet, income statement. The accounting equation must balance for each transaction. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders' Net Assets = Liabilities + Equity Revenues – Expenses = Income 4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar. $

Present Value of $1 PV of Annuity of $1 Issuance of a Bond at Face Value On January 1, 2017, Whitefeather Industries issued 900, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar. Required: 1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar. $ Identify and analyze the effect of the issuance of the bonds on January 1, 2017. Activity Financing Accounts Cash Increase, Bonds Payable Increase Statement(s) Balance Sheet only How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders' Net Assets = Liabilities + Equity Revenues – Expenses = Income Cash Bonds Payable No Entry No Entry 2. How would the issue price have been affected if the market rate of interest had been higher than 10%. Bonds would be issued at a discount. A premium or discount represents the difference between the face value and the issuance price of the bond. Bonds are issued at a discount when the market rate of interest exceeds the face rate. The discount on the bond equals the face value less issue price. Bonds are issued at a premium when the face rate exceeds the market rate. The premium on the bond equals the issue price less face value. 3. Identify and analyze the effect of the payment of interest on July 1, 2017. Activity Operating Accounts Cash Decrease, Interest Expense Increase Statement(s) Balance Sheet and Income Statement Identify and analyze the transaction by using the following steps: 1. Determine activity – operating, investing or financing. 2. Determine accounts affected and the amount of increases/decreases. 3. Determine the financial statements affected – balance sheet, income statement. The accounting equation must balance for each transaction. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders' Net Assets = Liabilities + Equity Revenues – Expenses = Income 4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar. $

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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Present Value of $1 PV of Annuity of $1

Issuance of a Bond at Face Value

On January 1, 2017, Whitefeather Industries issued 900, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar.

Required:

1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar. $

Identify and analyze the effect of the issuance of the bonds on January 1, 2017.

Activity	Financing
Accounts	Cash Increase, Bonds Payable Increase
Statement(s)	Balance Sheet only

How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet		Income Statement
					Stockholders'		Net
Assets	=	Liabilities	+	Equity	Revenues	–	Expenses	=	Income
Cash			Bonds Payable				No Entry			No Entry

2. How would the issue price have been affected if the market rate of interest had been higher than 10%.
Bonds would be issued at a discount.

A premium or discount represents the difference between the face value and the issuance price of the bond. Bonds are issued at a discount when the market rate of interest exceeds the face rate. The discount on the bond equals the face value less issue price. Bonds are issued at a premium when the face rate exceeds the market rate. The premium on the bond equals the issue price less face value.

3. Identify and analyze the effect of the payment of interest on July 1, 2017.

Activity	Operating
Accounts	Cash Decrease, Interest Expense Increase
Statement(s)	Balance Sheet and Income Statement

Identify and analyze the transaction by using the following steps:
1. Determine activity – operating, investing or financing.
2. Determine accounts affected and the amount of increases/decreases.
3. Determine the financial statements affected – balance sheet, income statement.
The accounting equation must balance for each transaction.

Balance Sheet		Income Statement
					Stockholders'		Net
Assets	=	Liabilities	+	Equity	Revenues	–	Expenses	=	Income

4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar.
$

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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