INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
10th Edition
ISBN: 9781264770335
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
error_outline
This textbook solution is under construction.
Students have asked these similar questions
McWherter Instruments sold $400 million of 6% bonds, dated January 1, on January 1, 2021. The bonds mature on December 31, 2040
(20 years). For bonds of similar risk and maturity, the market yield was 8%. Interest is paid semiannually on June 30 and December 31.
Blanton Technologies, Inc., purchased $400,000 of the bonds as a long-term investment. (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. Determine the price of the bonds issued on January 1, 2021.
2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2021.
3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2021 (at the effective rate).
4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2021 (at the effective rate).
Complete this question by entering your answers in the tabs below.
Required 1…
The following amortization and interest schedule reflects the issuance of 10-year bonds by Wildhorse Corporation on January 1,
2019, and the subsequent interest payments and charges. The company's year-end is December 31, and financial statements are
prepared once yearly.
Year
1/1/2019
2020
2019 $12,500 $13,305
12,500
13,401
13,510
13,631
13,767
13,919
2021
2024
2025
2022 12,500
2023 12,500
12,500
12,500
12,500 14,280
12,500
14,493
14,731
2026
Amortization Schedule
2027
Cash Interest
2028
12,500
12,500
14,089
Amount
Unamortized
$14,126
13,321
12,420
11,410
10,279
9,012
7,593
6,004
4,224
2,231
Carrying
Value
$ 110,874
111,679
112,580
113,590
114,721
115,988
117,407
118,996
120,776
122,769
125,000
Click here to view factor tables.
a. Indicate whether the bonds were issued at a premium or a discount.
On October 1, 2020, an entity borrowed cash and signed a three-year interest bearing note on which both the principal and interest are payable on October 1, 2023. On December 31, 2021, accrued interest payable should
A. not be reported as a liabilityB. be reported as current liabilityC. be reported as noncurrent liabilityD. be reported as part of noncurrent note payable
Knowledge Booster
Similar questions
- Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.arrow_forwardComprehensive Selected transactions of Lizard Lick Corporation during 2019 are as follows: Required: Prepare journal entries to record the preceding transactions for 2019. Include year-end interest accruals.arrow_forwardPrepare journal entries to record the following transactions relating to long-term bonds of Kirby, Inc (Show your computations).a. On June 1, 2019 Kirby Inc. issued $9.000,000, 5 % bonds for $8,051,000, which includes accrued interest. Interest is payable semiannually on February 1 and August 1 with the bonds maturing in ten years on February 1, 2029. The bonds dated February 1, 2019, are callable at 102.b. On August 1, 2019, Kirby paid interest on the bonds and recorded amortization. Kirby uses the straight-line method.arrow_forward
- Donna Clark Company issued $612,000 of 9%, 20-year bonds on January 1, 2025, at 101. Interest is payable semiannually on July 1 and January 1. Clark Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following.arrow_forwardPrepare all journal entries and adjusting journal entries necessary to record the information below for 2022: Red Robin holds corporate bonds with a face value of $218,500. It purchased these bonds on January 1 of the prior year (2021). The stated rate of the bonds is 4.85 %, but they were purchased at an effective rate of 7%. The bonds are 5-year bonds and pay interest on December 31 every year. Red Robin correctly classifies this investment as available for sale. This is the only AFS debt investment that Red Robin has ever had. The fair value of the bond on December 31 of the current year is $224,900.arrow_forwarda) Prepare the journal entry at the date of the bond purchase b) Prepare a bond amortization schedule to December 31, 2024 c) Prepare the entries and year-end entries from December 31, 2023, through to the collection of interest on December 31, 2024 d) Following the three-step approach, prepare the journal entries for the sale of the bond on December 31, 2024. Include the reclassification of unrealized gains and losses to net income.arrow_forward
- What is the journal entry to record issuance of the bonds on January 1, 2019? Dr. Cash, P500,000 and Cr. Bonds Payable, P500,000 Dr. Cash, P500,000 Cr. Premium on Bonds Payable, P28,253 & Cr. Bonds Payable P471,747 Dr. Cash, P471,747; Dr. Discounts on Bonds Payable, P28,253 & Cr. Bonds Payable P500,000 Dr. Cash, P471,747; Dr. Interest Expense, P28,253 and Cr. Bonds Payable P500,000arrow_forwardOn October 1, 2019, Jenkins Corporation bought bonds with a face value of $200,000 for $199,175, which included accrued interest. The bonds are due December 31, 2021, and carry a face rate of interest of 10.5%. Interest on the bonds is payable semiannually on June 30 and December 31. Jenkins uses the straight-line method to amortize the discount. Required: 1. Prepare journal entries to record the purchase of the bonds, each interest receipt, and the retirement of the issue on December 31, 2021. 2. Next Level If Jenkins failed to separately record the interest at acquisition, explain the errors that would occur in the company’s financial statements (no calculations are required).arrow_forwardRecord the appropriation of $77000 of retained earnings on December 31, 2022, by Jack Inc. to establish an appropriation for bond retirement. Record the entry to establish appropriation.arrow_forward
- Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.arrow_forwardThe following section is taken from Ohlman Ltd.'s. statement of financial position at December 31, 2018. Non‐current liabilities Bonds payable, 7%, due January 1, 2024 $16,000,000 Current liabilities Interest payable 1,120,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. Prepare the entry to record the accrual of interest on December 31, 2019.arrow_forwardPasta Corporation acquired 75% of Sauce Company on January 1, 2020 for $566,250 cash. The fair value of the other 25% ownership interest is estimated to be $188,750. ADDITIONAL INFORMATION: On the date of acquisition: * The Book Value of Sauce Company's net identifiable assets was $652,000. * Sauce's Company's Plant Assets were undervalued by $75,000 (remaining life was estimated to be 5 years). * Sauce's Company's Inventories were overvalued by $9,000 (all sold by year end). * New Goodwill was determined to be $37,000. At year-end, it was determined that the New Goodwill was impaired by $5,800. * For 2020, Sauce reported net income of $146,500 and paid dividends of $26,000. Assume that Pasta Company uses the fully adjusted equity method to account for its Investment in Sauce.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning