2nd Edition

ISBN: 9780134730370

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Textbook Question

Chapter 14, Problem 14.6P

Bond Issue, Interest Payments, Effective Interest Rate Method, Early Retirement. On

January 1, 2018, Organic Products issued $1,200,000 par value, 7%, 5-year bonds. Interest is payable semiannually at the end of the period. The market rate of interest on the date of the bond issue was 6%.

Required

a. Determine the issue price of the debt.
b. Prepare the amortization table for the bond issue assuming that Organic Products uses the effective interest rate method of amortization.
c. Prepare the journal entry to record the bond issue. Assume that the company uses a premium or discount account if needed.
d. Prepare the journal entry to record the early retirement of the bonds at the end of the third year (December 31, 2020) for $1,265,000.

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Chapter 14, Problem 14.5P

Chapter 14, Problem 14.7P

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Chapter 14 Solutions

Intermediate Accounting (2nd Edition)

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...

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Solution Summary: The author explains how the company issued 1,200,000 bonds at Par. The Term Period for conversion is 5 years.

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