Samantha Co. is buildings a new hockey arena at a cost of $5.000.000. It received a down payment of $1.000.000 from local businesses to support the project, and now needs to borrow $4.000.000 to complete the project. It therefore decides to issue $4.000.000 of 10%, 10-year bonds. These bonds were issued on July 1, 2010, and pay interest on each January 1 and July 1, start from January 1, 2011. The yield 8%. Samantha Co. statement of financial position on December 31. Instructions: 1. Compute interest payment. 2. Compute selling price of the bonds. Present value table factors are as follows: Present value of 1 for 10 periods at 8% 46319 Present value of 1 for 10 periods at 10% .38554 Present value of 1 for 20 periods at 4% .45639 Present value of 1 for 20 periods at 5%.37689 Present value of an ordinary annuity of 1 for 10 periods at 8% 6.71008 Present value of an ordinary annuity of 1 for 10 periods at 10% 6.14457 Present value of an ordinary annuity of 1 for 20 periods at 4% 13.59033 Present value of an ordinary annuity of 1 for 20 periods at 5% 12.46221 3. Prepare the journal entry to record the issuance of the bonds, adjusting, and payment interest on the following date: a. July 1, 2010. b. December 31, 2010. c. January 1, 2011. d. July 1, 2011. 4. On March 31, 2013, Samantha Co. calls the entire issue at 101 and cancels it. a. Compute Gain or Loss Extinguishment of Bonds b. Prepare the journal entry to record accrued interest and this retirement.
Samantha Co. is buildings a new hockey arena at a cost of $5.000.000. It received a down payment of $1.000.000 from local businesses to support the project, and now needs to borrow $4.000.000 to complete the project. It therefore decides to issue $4.000.000 of 10%, 10-year bonds. These bonds were issued on July 1, 2010, and pay interest on each January 1 and July 1, start from January 1, 2011. The yield 8%. Samantha Co. statement of financial position on December 31. Instructions: 1. Compute interest payment. 2. Compute selling price of the bonds. Present value table factors are as follows: Present value of 1 for 10 periods at 8% 46319 Present value of 1 for 10 periods at 10% .38554 Present value of 1 for 20 periods at 4% .45639 Present value of 1 for 20 periods at 5%.37689 Present value of an ordinary annuity of 1 for 10 periods at 8% 6.71008 Present value of an ordinary annuity of 1 for 10 periods at 10% 6.14457 Present value of an ordinary annuity of 1 for 20 periods at 4% 13.59033 Present value of an ordinary annuity of 1 for 20 periods at 5% 12.46221 3. Prepare the journal entry to record the issuance of the bonds, adjusting, and payment interest on the following date: a. July 1, 2010. b. December 31, 2010. c. January 1, 2011. d. July 1, 2011. 4. On March 31, 2013, Samantha Co. calls the entire issue at 101 and cancels it. a. Compute Gain or Loss Extinguishment of Bonds b. Prepare the journal entry to record accrued interest and this retirement.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 8RE
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Transcribed Image Text:Samantha Co. is buildings a new hockey arena at a cost of $5.000.000. It received a down payment of $1.000.000 from
local businesses to support the project, and now needs to borrow $4.000.000 to complete the project. It therefore
decides to issue $4.000.000 of 10%, 10-year bonds. These bonds were issued on July 1, 2010, and pay interest on each
January 1 and July 1, start from January 1, 2011. The yield 8%. Samantha Co. statement of financial position on December
31.
Instructions:
1. Compute interest payment.
2. Compute selling price of the bonds. Present value table factors are as follows: Present value of 1 for 10 periods at 8%
.46319 Present value of 1 for 10 periods at 10% .38554 Present value of 1 for 20 periods at 4% .45639 Present value of 1 for
20 periods at 5% .37689 Present value of an ordinary annuity of 1 for 10 periods at 8 % 6.71008 Present value of an
ordinary annuity of 1 for 10 periods at 10% 6.14457 Present value of an ordinary annuity of 1 for 20 periods at 4% 13.59033
Present value of an ordinary annuity of 1 for 20 periods at 5% 12.46221
3. Prepare the journal entry to record the issuance of the bonds, adjusting, and payment interest on the following date: a.
July 1, 2010. b. December 31, 2010. c. January 1, 2011. d. July 1, 2011.
4. On March 31, 2013, Samantha Co. calls the entire issue at 101 and cancels it. a. Compute Gain or Loss Extinguishment of
Bonds b. Prepare the journal entry to record accrued interest and this retirement.
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