Bonds Issuance: The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period. The Journal entry for the issuance of bonds.

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Answer 1

Question

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

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Stone Company is facing several decisions regarding investing and financing activities. Address each decision independently. On June 30, 2024, the Stone Company purchased equipment from Paper Corporation. Stone agreed to pay $28,000 on the purchase date and the balance in five annual installments of $5,000 on each June 30 beginning June 30, 2025. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Stone value the equipment? Stone needs to accumulate sufficient funds to pay a $580,000 debt that comes due on December 31, 2029. The company will accumulate the funds by making five equal annual deposits to an account paying 5% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2024. On January 1, 2024, Stone leased an office building. Terms of the lease require Stone to make 10 annual lease payments of $138,000 beginning on January 1, 2024. A 10% interest rate…

Answer 2

Question

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

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Answer 3

Question

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

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Answer 4

Question

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

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Answer 5

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

Answer 6

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Answer 7

Chapter 14, Problem 2PSB

Sub Part-1

To determine

Bonds Issuance:

The Bonds issuance by the company is a source of long term financing and is issued at a discount or premium depending the prevailing market rate of interest and stated rate of interest on bonds. When the stated rate of interest is higher than the market rate of interest, then the investors will be ready to invest only in the situation when the bonds are issued at premium. This premium on bonds issue shall be treated as income by deducting the amortized portion from the cash interest paid to arrive at the interest expense of the period.

The Journal entry for the issuance of bonds.

Answer 8

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Answer 9

Sub Part-2

To determine

Straight line Amortization of Premium:

The Straight line amortization of Premium is a technique of writing off the total discount over a period of bonds with an equal amount on each interest period. This equal amount can be computed by dividing the total amount of discount by the number of interest periods over a life of bonds.

The cash interest, straight line amortized premium and Interest expense for each interest period to be computed.

Answer 10

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Answer 11

Sub-Part 3

To determine

Total interest expense over the life of bonds:

The total interest expense over the life off bonds can be computed by the adding up the all the amount paid over the lifetime of the bonds i.e. cash interest payment and maturity value of bonds and then the amount borrowed at the time of issuance of bonds shall be deducted from the above computed amount to arrive at the amount of total interest expense over the life of the bonds.

The total interest expenses over the life of bonds.

Answer 12

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Answer 13

Sub Part-4

To determine

Amortization table:

The amortization table under straight line method reflects the premium amortized at each interest period, cash interest paid, total interest expense of each period, unamortized premium left at the end of period and carrying value of bonds in the books.

The Preparation of Amortization schedule.

Answer 14

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

Answer 15

Sub Part-5

To determine

Accounting treatment of interest payment and amortized discount:

The Accounting entry required to be passed at each interest period is debiting the total interest expense as per amortization chart and also, Premium on bonds payable is debited for the amount of premium amortized and credit being made to the cash account for cash interest paid.

The Journal entries of interest expenses for two interest periods.

Answer 16

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Answer 18

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Answer 19

Ch. 14 - Prob. 1QS Ch. 14 - QS 14-2 Issuing bonds at par P1 Dunphy Company...Ch. 14 - QS 14-3 Issuing bonds at par P1 Madrid Company...Ch. 14 - QS 14-4 Recording bond issuance and interest P1 P2...Ch. 14 - QS 14-5 Journalizing discount bond issuance...Ch. 14 - Prob. 6QS Ch. 14 - OS 14-6 Straight line: Bond computations...Ch. 14 - QS 14-8 Recording bond issuance and discount...Ch. 14 - QS 14-9 Straight-Line: Premium bond computations...Ch. 14 - On July 1. Aloha Co. s a call option that...

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