INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
10th Edition
ISBN: 9781264770335
Author: SPICELAND
Publisher: MCG
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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…
Question 5.
On 1 January 2021 Corgi Ltd issued a £5m convertible bond at nominal value. There
were no issue costs. The bond is redeemable at par on 1 January 2024 or bond
holders can convert their bond into ordinary shares, with a nominal value of £1. The
terms of the conversion are 2 shares for every £100 of bond.
The coupon rate on the bond is 10%, payable annually in arrears. Bonds issued by
similar entities without the conversion rights bear interest at 15%.
Tanner-UNF Corporation acquired as a long-term investment $290 million of 8% bonds, dated July 1, on July 1, 2021. Company
management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 10% for bonds of similar
risk and maturity. Tanner-UNF paid $260 million for the bonds. The company will receive interest semiannually on June 30 and
December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $270 million.
Required:
1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 2021, at
the effective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet.
4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on
January 2, 2022, for $250 million. Prepare the journal entries…
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- Don't use AI.arrow_forwardCullumber Electric sold €3,950,000, 12%, 10-year bonds on January 1, 2020. The bonds were dated January 1 and pay interest annually on January 1. Cullumber Electric uses the straight-line method to amortize bond premium or discount. The bonds were sold at 101. Prepare the journal entry to record the issuance of the bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Jan. 1, 2020 Prepare a bond premium amortization schedule for the first 4 interest periods. Debit Credit (B) Annual Interest Periods (A) Interest to Be Paid (10%* €3,00,000) (C) Interest Expense to Be (D) Recorded (A)-(C) Premium Amortization (€120,000*10%) Bond Carrying Val Issue date 1 300000 3950 € 2 300000 3950 300000 3950 300000 3950arrow_forward3. Prepare the journal entries to record the issuance of the bonds by Sanyal and Barnwell’s investment on February 1, 2024. 4. Prepare the journal entries by both firms to record all events related to the bonds through January 31, 2026. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)arrow_forward
- a) 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_forwardThe 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.arrow_forwardGeneral Corporation purchased $938,000 of bonds with a coupon rate of 10% at face value on December 5, 2021. The market price of the bond was $984,000 on December 31, 2021. Required: Prepare the appropriate journal entry on December 31, 2021, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Ignore the journal entry for coupon payment and interest recognition. 1. Trading securities. 2. Securities available-for-sale. 3. Held-to-maturity securities. View transaction list Journal entry worksheet 2 Record the unrealized holding gain or loss for held-to-maturity securities. Note: Enter debits before credits. Transaction General Journal Debit Credit 3arrow_forward
- General Corporation purchased $938,000 of bonds with a coupon rate of 10% at face value on December 5, 2021. The market price of the bond was $984,000 on December 31, 2021. Required: Prepare the appropriate journal entry on December 31, 2021, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Ignore the journal entry for coupon payment and interest recognition. 1. Trading securities. 2. Securities available-for-sale. 3. Held-to-maturity securities. View transaction list Journal entry worksheet 1 2 > Record the unrealized holding gain or loss for trading securities. Note: Enter debits before credits. Transaction General Journal Debit Credit 1arrow_forwardGeneral Corporation purchased $938,000 of bonds with a coupon rate of 10% at face value on December 5, 2021. The market price of the bond was $984,000 on December 31, 2021. Required: Prepare the appropriate journal entry on December 31, 2021, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Ignore the journal entry for coupon payment and interest recognition. 1. Trading securities. 2. Securities available-for-sale. 3. Held-to-maturity securities. View transaction list Journal entry worksheet 1 2 3 > Record the unrealized holding gain or loss for securities available-for-sale. Note: Enter debits before credits. Transaction General Journal Debit Credit 2arrow_forwardOn January 1, 2021, Loop Raceway issued 590 bonds, each with a face value of $1,000, a stated interest rate of 7 percent paid annually on December 31, and a maturity date of December 31, 2023. On the issue date, the market interest rate was 8 percent, so the total proceeds from the bond issue were $574,776. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare a bond amortization schedule. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 99. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 5 Prepare a bond amortization schedule. Changes During the Period Ending Bond Liability Balances Discount Amortized Interest Expense Discount on Bonds Payable…arrow_forward
- Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cashinterest Effectiveinterest Decrease inbalance Outstandingbalance 1/1/2021 $ 207,020 6/30/2021 $ 7,000 $ 6,211 $ 789 206,230 12/31/2021 7,000 6,187 813 205,417 6/30/2022 7,000 6,163 837 204,580 12/31/2022 7,000 6,137 863 203,717 6/30/2023 7,000 6,112 888 202,829 12/31/2023 7,000 6,085 915 201,913 6/30/2024 7,000 6,057 943 200,971 12/31/2024 7,000 6,029 971 200,000 What is the annual effective interest rate on the bonds?arrow_forwardPlease send answer as the chartarrow_forwardDevin Company computes the following bond interest amortization table for bonds issued on January 1, 2021. Use the information on this table to answer the questions below. Interest Cash Payment Payment Interest Decrease in Вook Date Amount Discount Value Expense $441,068 $444,310 $447,683 $451,190 $454,838 $458,631 $462,577 $466,680 $470,947 $475,385 Discount $360,000 $360,000 $360,000 $360,000 $360,000 $360,000 $360,000 $360,000 $360,000 $360,000 $81,068 $84,310 $87,683 $91,190 $94,838 $98,631 $102,577 $106,680 $110,947 $115,385 $892,240 $807,929 $720,247 $629,056 $534,219 $435,587 $333,011 $226,331 $115,385 $0 $11,107,760 $11,192,071 $11,279,753 $11,370,944 $11,465,781 $11,564,413 $11,666,989 $11,773,669 $11,884,615 $12,000,000 June 30, 2021 Dec 31, 2021 June 30, 2022 Dec 31, 2022 June 30, 2023 Dec 31, 2023 June 30, 2024 Dec 31, 2024 June 30, 2025 Dec 31, 2025arrow_forward
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