Determine bond price ; record interest; report bonds at fair value • LO14–6 On January 1, 2018, NFB Visual Aids issued $800,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $668,000 as determined by their market value in the over-the-counter market. Required: 1. Determine the price of the bonds at January 1, 2018, and prepare the journal entry to record their issuance. 2. Prepare the journal entry to record interest on June 30, 2018 (the first interest payment). 3. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment). 4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet.
Determine bond price ; record interest; report bonds at fair value • LO14–6 On January 1, 2018, NFB Visual Aids issued $800,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $668,000 as determined by their market value in the over-the-counter market. Required: 1. Determine the price of the bonds at January 1, 2018, and prepare the journal entry to record their issuance. 2. Prepare the journal entry to record interest on June 30, 2018 (the first interest payment). 3. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment). 4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet.
Solution Summary: The author explains that bonds are a kind of interest bearing notes payable, usually issued by companies, universities, and governmental organizations.
Determine bond price; record interest; report bonds at fair value
• LO14–6
On January 1, 2018, NFB Visual Aids issued $800,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $668,000 as determined by their market value in the over-the-counter market.
Required:
1. Determine the price of the bonds at January 1, 2018, and prepare the journal entry to record their issuance.
2. Prepare the journal entry to record interest on June 30, 2018 (the first interest payment).
3. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).
4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet.
Definition Definition Assets available to stockholders after a company's liabilities are paid off. Stockholders’ equity is also sometimes referred to as owner's equity. A stockholders’ equity or book value generally includes common stock, preferred stock, and retained earnings and is an indicator of a company's financial strength.
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