Review the following three bonds payable assumptions: (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar) Assumption 1. Seven-year bonds payable with face value of $83,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $83,000. Journalize the issuance of the bonds when the market interest rate is 10%. Date Accounts Debit Credit 5 71 9 30

Review the following three bonds payable assumptions: (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar) Assumption 1. Seven-year bonds payable with face value of $83,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $83,000. Journalize the issuance of the bonds when the market interest rate is 10%. Date Accounts Debit Credit 5 71 9 30

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.1E

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There are certain patterns we should expect to see on a bond amortization table. Complete the following statements regarding these patterns. Item Statements A. Assuming a term bond is issued at a premium, the cash interest payment calculated every period should: B. Assuming a term bond is issued at a premium, the interest expense amount calculated every period using the effective interest method should be C. Assuming a term bond is issued at a premium, the carrying value over time should be D. Assuming a term bond is issued at either a premium or a discount, the carrying value on the issuance date should be equal to the bond's
Use the worksheet to compute the bond issue price if the effective interest rate is 9%. Bond issue price _____
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If bonds are redeemed on maturity date, any premium or discount a. Is carried forward and written off in the same manner as that used prior to the maturity date. b. Should be used to calculate the gain or loss resulting from the maturity of the bonds. c. Should be written off directly to a bond retirement account as the bond will be redeemed. d. Will be fully amortized as its amortization period is designed to coincide with the life of the bond issue.
Part I(1) What does it mean to amortize a bond premium or discount? Why is it necessary? (2) What are the two bond amortization methods mentioned in the book and how are they different? Part IIPlease select ONE of the problems below and record the proper journal entry for recording the issuance of the bond. Hint: You will need to refer to the Present Value Tables.pdf Download Present Value Tables.pdf. Please indicate which scenario you are answering. (a) On January 1, a corporation issued a $1 million, five-year, 10 percent bond that pays interest semiannually. The market interest rate on January 1 was 12 percent. (b) On January 1, a corporation issued a $1 million, five-year, 11 percent bond that pays interest semiannually. The market interest rate on January 1 was 10 percent. Part IIIPlease describe what is meant by “Times Interest Earned.” How is it calculated? Suppose you calculated this ratio for a company for two consecutive years and the results were the following: Year…
From page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem? Group of answer choices A. Annual bond or semiannual bond B. Whether the market rate is different from the stated rate. C. The cash flows provided by the bond. D. The company's debt to equity ratio.
journal entries I need help with I can not understand (a)Record the bond issue (b)Record the first semiannual interest payment. (c)Record the second semiannual interest payment.
When bonds are issued at a discount and the effective interest method is used for amortization, at each successive interest payment date, the interest expense: Select one: a. Increases b. Is equal to the change in market value of the bonds c. Decreases d. Is equal to the change in carrying value of the bonds e. Stays the same
Terms related to long-term debt. Place the letter of the best matching phrase before each word. 1. Indenture 6. Times Interest Earned Ratio Refunding Bonds Issued at Par 2. 7. Mortgage 3. 8. Premium on Bonds Carrying Value Nominal Rate 4. 9. Reacquisition Price 5. 10. Market Rate Requires that bond discount be reported in the balance sheet as a direct deduction from the face of the bond. b. a. Rate set by party issuing the bonds which appears on the bond instrument. The interest paid each period is the effective interest at date of issuance. d. C. Rate of interest actually earned by the bondholders. Results when bonds are sold below par. f. e. Results when bonds are sold above par. The replacement of an existing bond issuance with a new one. g. h. Price paid by issuing corporation for its own bonds. Book value of bonds at any given date. Ratio of current assets to current liabilities. i. k. The bond contract or agreement. 1. Indicates the company's ability to meet interest payments as…
Question-based on, "effective-interest method bond". I have tried it but bonds are difficult.
When bonds are issued at a premium and the effective interest method is used for amortization, at each successive interest payment date, the interest expense: Select one: a. Is equal to the change in market value of the bonds b. Decreases c. Stays the same d. Increases e. Is equal to the change in carrying value of the bonds
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