Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value. Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate. Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

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Answer 1

Question

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

d)

To determine

The amount of bond interest expense for first year.

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Please provide the accurate answer to this general accounting problem using valid techniques.

Accurate Answer

Pacific Retail Store purchased merchandise inventory worth $8,500 on February 15, with payment terms of 2/10, n/30 (meaning a 2% discount if paid within 10 days, otherwise the full amount is due within 30 days). If Pacific pays the invoice on February 22, how much will they pay?

Answer 2

Question

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

d)

To determine

The amount of bond interest expense for first year.

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Answer 3

Question

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

d)

To determine

The amount of bond interest expense for first year.

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Answer 4

Question

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

d)

To determine

The amount of bond interest expense for first year.

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Answer 5

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

d)

To determine

The amount of bond interest expense for first year.

Answer 6

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

Answer 7

Chapter 12, Problem 12.26EX

a)

To determine

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

Answer 8

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

Answer 9

b)

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

Answer 10

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

Answer 11

c)

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

Answer 12

d)

To determine

The amount of bond interest expense for first year.

Answer 13

d)

To determine

The amount of bond interest expense for first year.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 12 - Describe the two distinct obligations incurred by...Ch. 12 - Explain the meaning of each of the following terms...Ch. 12 - Prob. 3DQ Ch. 12 - A corporation issues 26,000,000 of 9% bonds to...Ch. 12 - Prob. 5DQ Ch. 12 - The following data relate to a 2,000,000, 8% bond...Ch. 12 - Prob. 7DQ Ch. 12 - Prob. 8DQ Ch. 12 - Fleeson Company needs additional funds to purchase...Ch. 12 - Prob. 10DQ

Solution Summary: The author explains the effective-interest method of amortization, which apportions the amount of bond discount or premium based on the market interest rate.

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

The amount of bond interest expense for first year.

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Chapter 12 Solutions