Connect Access Card for Financial Accounting
9th Edition
ISBN: 9781259738678
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 10.5P
1.
To determine
Calculate the issuance price of the bonds on January 1.
2.
To determine
Calculate the amount of interest expense that is recorded on December 31 of this year.
3.
a.
To determine
Identify the effect on debt-to-equity ratio and times interest earned ratio, if the bonds are issued.
b.
To determine
Identify the effect on debt-to-equity ratio and time interest earned ratio, if interest expense is recorded and cash is paid for interest to the investors.
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On January 1, Year 1, Parker Company issued bonds with a face value of $70,000, a stated rate of interest of 10 percent, and a five-year
term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 12 percent at the time the
bonds were issued. The bonds sold for $64,953. Parker used the effective interest rate method to amortize the bond discount.
Note: Round your intermediate calculations and final answers to the nearest whole dollar amount.
Required
a. Prepare an amortization table.
Date
January 1, Year 1
December 31, Year 1
December 31, Year 2
December 31, Year 3
December 31, Year 4
December 31, Year 5
Totals
Cash
Payment
b. Carrying value
c. Interest expense
d. Cash outflow for interest
Interest Discount
Expense Amortization
$ 7,000 $ 7,794 $
$ 7,000 $ 7,794 $
794
794
Carrying
Value
$ 64,953
65,747
b. What is the carrying value that would appear on the Year 4 balance sheet?
c. What is the interest expense that would appear on the…
The Designer Company issued 10-year bonds on January 1. The 5% bonds have a face value of $747,000 and pay interest every January 1 and July 1. The bonds were sold for $620,839 based on the market interest rate of 6%. Designer uses the effective-interest method to amortize bond discounts and premiums. What amount of interest expense should Designer record on July 1 of the first year (rounded to the nearest dollar)? Select the correct answer.$15,521 $18,625 $22,410 $18,675
On January 1, Company L has 5-year bonds with par value of $1,250,000. Interest is paid every 6 months. Company L uses the effective interest method to amortize bond premiums or discounts. The carrying value of the bonds on January 1 was $1,118,000. On June 30, Company L makes its first interest payment and records the following entry: debiting interest expense for $44,720 and crediting cash for $62,500. What is the annual stated interest rate for the bonds?
A. 10%
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Chapter 10 Solutions
Connect Access Card for Financial Accounting
Ch. 10 - From the perspective of the issuer, what are some...Ch. 10 - What are the primary characteristics of a bond?...Ch. 10 - Prob. 3QCh. 10 - Differentiate between a bond indenture and a bond...Ch. 10 - Prob. 5QCh. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - Prob. 8QCh. 10 - What is the book value of a bond?Ch. 10 - Prob. 10Q
Ch. 10 - Prob. 11QCh. 10 - Prob. 12QCh. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Prob. 7MCQCh. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQCh. 10 - Prob. 10.1MECh. 10 - Computing the Price of a Bond Issued at Par LO10-2...Ch. 10 - Understanding Financial Ratios 0-3, 10-6 The...Ch. 10 - Computing the Times Interest Earned Ratio LO10-3...Ch. 10 - Computing the Price of a Bond Issued at a Discount...Ch. 10 - Recording the Issuance and Interest Payments of a...Ch. 10 - Prob. 10.7MECh. 10 - Prob. 10.8MECh. 10 - Prob. 10.9MECh. 10 - Prob. 10.10MECh. 10 - Prob. 10.11MECh. 10 - Prob. 10.12MECh. 10 - Prob. 10.13MECh. 10 - Prob. 10.14MECh. 10 - Prob. 10.1ECh. 10 - Prob. 10.2ECh. 10 - Prob. 10.3ECh. 10 - Computing Issue Prices of Bonds Sold at Par, at a...Ch. 10 - Prob. 10.5ECh. 10 - Prob. 10.6ECh. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - (Chapter Supplement) Recording and Reporting a...Ch. 10 - Prob. 10.10ECh. 10 - Prob. 10.11ECh. 10 - Explaining Why Debt Is Issued at a Price Other...Ch. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Prob. 10.15ECh. 10 - Prob. 10.16ECh. 10 - Prob. 10.17ECh. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - Prob. 10.21ECh. 10 - Prob. 10.22ECh. 10 - Prob. 10.23ECh. 10 - Prob. 10.24ECh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Comparing Bonds Issued at Par, at a Discount, and...Ch. 10 - Prob. 10.4PCh. 10 - Prob. 10.5PCh. 10 - Recording and Reporting Bonds Issued at a Discount...Ch. 10 - Recording and Reporting a Bond Issued at a...Ch. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Prob. 10.10PCh. 10 - Prob. 10.11PCh. 10 - Prob. 10.12PCh. 10 - Prob. 10.13PCh. 10 - Prob. 10.14PCh. 10 - Prob. 10.15PCh. 10 - Prob. 10.16PCh. 10 - Prob. 10.1APCh. 10 - Prob. 10.2APCh. 10 - Prob. 10.3APCh. 10 - Prob. 10.4APCh. 10 - Prob. 10.5APCh. 10 - Prob. 10.6APCh. 10 - Recording and Reporting a Bond Issued at a Premium...Ch. 10 - Prob. 10.8APCh. 10 - Prob. 10.1CONCh. 10 - Prob. 10.1CPCh. 10 - Prob. 10.2CPCh. 10 - Prob. 10.3CPCh. 10 - Prob. 10.4CPCh. 10 - Prob. 10.5CPCh. 10 - Evaluating an Ethical Dilemma LO 10-1 Assume that...
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