The issue price of the bond and the discount or premium on the bond. Given information: Company issued bonds worth $900,000. Term period for conversion is 6 years Interest is payable semi-annually each January 1 and July 1. Bond issue costs are $72,725. Market rate of interest is 8%.

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Answer 1

Question

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

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Answer 2

Question

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

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Answer 3

Question

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

Expert Solution & Answer

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Answer 4

Question

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

Expert Solution & Answer

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Answer 5

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

Answer 6

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

Answer 7

Chapter 14, Problem 14.5P

a.

To determine

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

Answer 8

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

Answer 9

b.

To determine

To prepare: The amortization table for the bond issue using effective rate of interest.

Answer 10

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

Answer 11

c.

To determine

To prepare: The journal for recording necessary entries for the bonds for the first year.

Answer 12

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

Answer 13

d.

To determine

To prepare: The journal for recording interest accrual and amortization cost for the third year.

Answer 14

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

Answer 15

e.

To determine

To prepare: The journal for recording payment of the bonds at maturity.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4Q Ch. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6Q Ch. 14 - Prob. 14.7Q Ch. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9Q Ch. 14 - Can companies reclassify short-term debt expected...

The issue price of the bond and the discount or premium on the bond. Given information: Company issued bonds worth $900,000. Term period for conversion is 6 years Interest is payable semi-annually each January 1 and July 1. Bond issue costs are $72,725. Market rate of interest is 8%.

Solution Summary: The author explains the effect interest rate method, which computes the interest expense by multiplying the historical market rate of interest by the beginning balance.

The issue price of the bond and the discount or premium on the bond.

Given information:

Company issued bonds worth $900,000.

Term period for conversion is 6 years

Interest is payable semi-annually each January 1 and July 1.

Bond issue costs are $72,725.

Market rate of interest is 8%.

To prepare: The amortization table for the bond issue using effective rate of interest.

To prepare: The journal for recording necessary entries for the bonds for the first year.

To prepare: The journal for recording interest accrual and amortization cost for the third year.

To prepare: The journal for recording payment of the bonds at maturity.

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Chapter 14 Solutions