The notes to the Thorson Ltd.financial statements reported the following data on December 31, Year 1 (end of the fiscal year):Thorson amortizes bond discounts using the effective-interest method and pays all interestamounts at December 31. Requirements1. Assume the market interest rate is 6% on January 1 of year 1, the date the bonds are issued.a. Using the PV function in Excel, what is the issue price of the bonds?b. What is the maturity value of the bonds?c. What is Thorson’s annual cash interest payment on the bonds?d. What is the carrying amount of the bonds at December 31, year 1?2. Prepare an amortization table through the maturity date for the bonds using Excel. (Roundall amounts to the nearest dollar.) How much is Thorson’s interest expense on the bonds forthe year ended December 31, Year 4?3. Show how Thorson would report these bonds and notes at December 31, Year 4. P9-53A. (Learning Objectives 2, 6: Analyze a company's long-term debt; report long-termdebt on the balance sheet [effective-interest method]) The notes to the Thorson Ltd.financial statements reported the following data on December 31, Year 1 (end of the fiscal year):Note 6. IndebtednessBonds payable, 1% due on December 31, Year 8... $3,500,000Less: Discount.....Notes payable, 6%, payable in $45,000 annualinstallments starting in Year 5.........??$270,000Thorson amortizes bond discounts using the effective-interest method and pays all interestamounts at December 31.Requirements1. Assume the market interest rate is 6% on January 1 of year 1, the date the bonds are issued.a. Using the PV function in Excel, what is the issue price of the bonds?b. What is the maturity value of the bonds?c. What is Thorson's annual cash interest payment on the bonds?d. What is the carrying amount of the bonds at December 31, year 1?2. Prepare an amortization table through the maturity date for the bonds using Excel. (Roundall amounts to the nearest dollar.) How much is Thorson's interest expense on the bonds forthe year ended December 31, Year 4?3. Show how Thorson would report these bonds and notes at December 31, Year 4.

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Answered: The notes to the Thorson Ltd. financial…

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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Question

The notes to the Thorson Ltd.
financial statements reported the following data on December 31, Year 1 (end of the fiscal year):

Thorson amortizes bond discounts using the effective-interest method and pays all interest
amounts at December 31.

Requirements
1. Assume the market interest rate is 6% on January 1 of year 1, the date the bonds are issued.
a. Using the PV function in Excel, what is the issue price of the bonds?
b. What is the maturity value of the bonds?
c. What is Thorson’s annual cash interest payment on the bonds?
d. What is the carrying amount of the bonds at December 31, year 1?
2. Prepare an amortization table through the maturity date for the bonds using Excel. (Round
all amounts to the nearest dollar.) How much is Thorson’s interest expense on the bonds for
the year ended December 31, Year 4?
3. Show how Thorson would report these bonds and notes at December 31, Year 4.

P9-53A. (Learning Objectives 2, 6: Analyze a company's long-term debt; report long-term
debt on the balance sheet [effective-interest method]) The notes to the Thorson Ltd.
financial statements reported the following data on December 31, Year 1 (end of the fiscal year):
Note 6. Indebtedness
Bonds payable, 1% due on December 31, Year 8... $3,500,000
Less: Discount.....
Notes payable, 6%, payable in $45,000 annual
installments starting in Year 5.........
?
?
$270,000
Thorson amortizes bond discounts using the effective-interest method and pays all interest
amounts at December 31.
Requirements
1. Assume the market interest rate is 6% on January 1 of year 1, the date the bonds are issued.
a. Using the PV function in Excel, what is the issue price of the bonds?
b. What is the maturity value of the bonds?
c. What is Thorson's annual cash interest payment on the bonds?
d. What is the carrying amount of the bonds at December 31, year 1?
2. Prepare an amortization table through the maturity date for the bonds using Excel. (Round
all amounts to the nearest dollar.) How much is Thorson's interest expense on the bonds for
the year ended December 31, Year 4?
3. Show how Thorson would report these bonds and notes at December 31, Year 4.

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