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 amortization method: Effective-interest amortization methodit is an amortization model that apportions the amount of bond discount or premium based on the market interest rate. In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium. To Journalize: Sale of the bonds.

Question

You are employed by an external audit firm that is hired by JBltd, a privately owned incorporated business. Accounting records are maintained on a computer using proprietary software. You have worked on the audit for three years and this year you are in charge of the audit. Your assistant is a newly recruited business graduate who has done an accounting course but has no practical experience. Because of the small size of the company there is limited opportunity for segregation of duties. You decide, as in previous years, that the appropriate audit strategy is to obtain evidence primarily through the performance of substantive procedures. You also plan to perform the audit around the computer as the proprietary software is known to be reliable and details of all transactions and balances can be readily printed out. On arriving at the company's premises in December 2019 to perform the final audit on the 31 October 2019 financial statements, you obtain a copy of the year end bank…

Answer 1

Question

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

(b)

To determine

The amount of bond interest expense for first year.

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

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You are employed by an external audit firm that is hired by JBltd, a privately owned incorporated business. Accounting records are maintained on a computer using proprietary software. You have worked on the audit for three years and this year you are in charge of the audit. Your assistant is a newly recruited business graduate who has done an accounting course but has no practical experience. Because of the small size of the company there is limited opportunity for segregation of duties. You decide, as in previous years, that the appropriate audit strategy is to obtain evidence primarily through the performance of substantive procedures. You also plan to perform the audit around the computer as the proprietary software is known to be reliable and details of all transactions and balances can be readily printed out. On arriving at the company's premises in December 2019 to perform the final audit on the 31 October 2019 financial statements, you obtain a copy of the year end bank…

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Answer 2

Question

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

(b)

To determine

The amount of bond interest expense for first year.

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

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Answer 3

Question

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

(b)

To determine

The amount of bond interest expense for first year.

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

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Answer 4

Question

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

(b)

To determine

The amount of bond interest expense for first year.

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

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Answer 5

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

(b)

To determine

The amount of bond interest expense for first year.

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

Answer 6

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

Answer 7

Chapter 14, Problem 14.23EX

a (1)

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

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

To Journalize: Sale of the bonds.

Answer 8

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

Answer 9

b (2)

To determine

To Journalize: First semiannual interest payment and amortization of discount on bonds.

Answer 10

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

Answer 11

c (3)

To determine

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

Answer 12

(b)

To determine

The amount of bond interest expense for first year.

Answer 13

(b)

To determine

The amount of bond interest expense for first year.

Answer 14

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

Answer 15

C.

To determine

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

Answer 16

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Answer 27

Ch. 14 - Describe the two distinct obligations incurred by...Ch. 14 - Explain the meaning of each of the following terms...Ch. 14 - If you asked your broker to buy you a 12% bond...Ch. 14 - Prob. 4DQ Ch. 14 - If bonds issued by a corporation are sold at...Ch. 14 - The following data relate to a 2,000,000, 8% bond...Ch. 14 - Bonds Payable has a balance of 5,000,000, and...Ch. 14 - What is a mortgage note?Ch. 14 - Fleeson Company needs additional funds to purchase...Ch. 14 - In what section of the balance sheet would a bond...

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

To Journalize: First semiannual interest payment and amortization of discount on bonds.

To Journalize: Second semiannual interest payment and amortization of discount on bonds.

The amount of bond interest expense for first year.

To explain: The reason why the company was able to issue the bonds for $43,495,895 rather than $50,000,000.

Chapter 14 Solutions