Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 14, Problem 23E
a (1)
To determine
Journalize the sale of the bonds.
a (2)
To determine
Journalize first semiannual interest payment and amortization of discount on bonds.
a (3)
To determine
Journalize second semiannual interest payment and amortization of discount on bonds.
b.
To determine
Calculate the amount of bond interest expense for first year.
c.
To determine
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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On the first day of its fiscal year, Ebert Company issued $50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert Company receiving cash of $43,495,895. The company uses the interest method.a. Journalize the entries to record the following:1. Sale of the bonds.2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar.3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar.b. Compute the amount of the bond interest expense for the first year.c. Explain why the company was able to issue the bonds for only $43,495,895 rather than for the face amount of $50,000,000.
On the first day of its fiscal year, Ebert Company issued $12,500,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert receiving cash of $10,873,974. The company uses the interest method.
Required:
a. Journalize the entries to record the following transactions. Refer to the Chart of Accounts for exact wording of account titles.
1.
Sale of the bonds.
2.
First semiannual interest payment, including amortization of discount. Round to the nearest dollar.
3.
Second semiannual interest payment, including amortization of discount. Round to the nearest dollar.
b. Compute the amount of the bond interest expense for the first year.
c. Explain why the company was able to issue the bonds for only $10,873,974 rather than for the face amount of $12,500,000.
On the first day of its fiscal year, Ebert Company issued $23,000,000 of 5-year, 8% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 10%, resulting in Ebert receiving cash of $21,223,931. The company uses the interest method.
a. Journalize the entries to record the following:
1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Chapter 14 Solutions
Financial Accounting
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 - A corporation issues 26,000,000 of 9% bonds to...Ch. 14 - If bonds issued by a corporation are sold at a...Ch. 14 - Prob. 6DQCh. 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...
Ch. 14 - Prob. 1PEACh. 14 - Brower Co. is considering the following...Ch. 14 - On January 1, the first day of the fiscal year, a...Ch. 14 - On January 1, the first day of the fiscal year, a...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Prob. 4PEACh. 14 - Prob. 4PEBCh. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Prob. 6PEACh. 14 - Prob. 6PEBCh. 14 - A 1,500,000 bond issue on which there is an...Ch. 14 - A 500,000 bond issue on which there is an...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Prob. 9PEACh. 14 - Prob. 9PEBCh. 14 - Prob. 1ECh. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Prob. 4ECh. 14 - Prob. 5ECh. 14 - On the first day of its fiscal year, Pretender...Ch. 14 - Lerner Corporation wholesales repair products to...Ch. 14 - Prob. 8ECh. 14 - Emil Corp. produces and sells wind-energy-driven...Ch. 14 - On the first day of the fiscal year, Shiller...Ch. 14 - Prob. 11ECh. 14 - On January 1, 2016, Bryson Company obtained a...Ch. 14 - Prob. 13ECh. 14 - Prob. 14ECh. 14 - Prob. 15ECh. 14 - Prob. 16ECh. 14 - Tommy John is going to receive 1,000,000 in three...Ch. 14 - Prob. 18ECh. 14 - On January 1, 2016, you win 50,000,000 in the...Ch. 14 - Prob. 20ECh. 14 - Prob. 21ECh. 14 - Prob. 22ECh. 14 - Prob. 23ECh. 14 - Prob. 24ECh. 14 - Prob. 25ECh. 14 - Boyd Co. produces and sells aviation equipment. On...Ch. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Saverin Inc. produces and sells outdoor equipment....Ch. 14 - The following transactions were completed by...Ch. 14 - Prob. 5PACh. 14 - Saverin, Inc. produces and sells outdoor...Ch. 14 - Prob. 1PBCh. 14 - Prob. 2PBCh. 14 - Prob. 3PBCh. 14 - The following transactions were completed by...Ch. 14 - Prob. 5PBCh. 14 - Prob. 6PBCh. 14 - General Electric Capital, a division of General...Ch. 14 - Solar Industries develops and produces...Ch. 14 - Prob. 3CPCh. 14 - Xentec Inc. has decided to expand its operations...Ch. 14 - Prob. 5CPCh. 14 - The following financial data (in thousands) were...
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