Loose-leaf for Fundamentals of Financial Accounting with Connect

5th Edition

ISBN: 9781259619007

Author: Fred Phillips Associate Professor

Publisher: McGraw-Hill Education

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Chapter 10, Problem 10.10CP

(Supplements 10B or 10C) Completing an Amortization Schedule (Effective-Interest Amortization or Simplified Effective-Interest)

Hondor Corporation issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2015. The stated interest rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been completed (amounts in thousands):

Chapter 10, Problem 10.10CP, (Supplements 10B or 10C) Completing an Amortization Schedule (Effective-Interest Amortization or

Required:

1. Complete the amortization schedule.
2. What was the maturity amount (face value) of the bonds?
3. How much cash was received at date of issuance (sale) of the bonds?
4. Was there a premium or a discount? If so, which and how much was it?
5. How much cash is paid for interest each period and will be paid in total for the full life of the bond issue?
6. What is the slated interest rate?
TIP: The stated interest rate can be calculated by comparing the cash payment to the face value of the bond.
7. What is the market interest rate?
8. What amount of interest expense should be reported on the income statement each year?
9. Show how the bonds should be reported on the balance sheet at the end of 2015 and 2016.

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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Chapter 10, Problem 10.9CP

Chapter 10, Problem 10.1PA

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Chapter 10 Solutions

Loose-leaf for Fundamentals of Financial Accounting with Connect

Ch. 10 - Prob. 1Q Ch. 10 - Prob. 2Q Ch. 10 - What three factors influence the dollar amount...Ch. 10 - Prob. 4Q Ch. 10 - Prob. 5Q Ch. 10 - Prob. 6Q Ch. 10 - Prob. 7Q Ch. 10 - If a company has a long-term loan that has only...Ch. 10 - What are the reasons that some bonds are issued at...Ch. 10 - Prob. 10Q

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Solution Summary: The author explains the straight-line amortization method, which spreads the amount of the bond discount equally over the interest period.

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