Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 14, Problem 4PEB
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The journal entry to record issuing bonds at a discount will
include a debit to the Cash account for the following amount:
O The face value of the bonds
O The stated value of the bonds
O The maturity value of the bonds
The face value of the bonds minus the amount of the discount
O The face value of the bonds plus the amount of the discount
Review the following three bonds payable assumptions:
(Click the icon to view the bond assumptions.)
Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then
credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.)
x lid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $84,000.
More Info
1. Seven-year bonds payable with face value of $84,000 and stated interest rate of 10%,
paid semiannually. The market rate of interest is 10% at issuance. The present value of
the bonds at issuance is $84,000.
2. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present
value of the bonds at issuance is $76,167.
3. Same bonds payable as in assumption 1, but…
Review the following three bonds payable assumptions:
(Click the icon to view the bond assumptions.)
Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then
credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.)
More Info
- X Jaid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $86.0000.
1. Seven-year bonds payable with face value of $86,000 and stated interest rate of 10%,
paid semiannually. The market rate of interest is 10% at issuance. The present value of
the bonds at issuance is $86.000.
2. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present
value of the bonds at issuance is $77,981.
3. Same bonds payable as in assumption 1,…
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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- Use the worksheet to compute the bond issue price if the effective interest rate is 9%. Bond issue price _____arrow_forwardReview the following three bonds payable assumptions: 1 (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) O More Info semiannually. 1. Ten-year bonds payable with face value of $89,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. The present value of the bonds at issuance is $89,000. 2. Same bonds payable as in assumption 1, but the market interest rate is 16%. The present value of the bonds at issuance is $80,301. 3. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $99,226. Print Donearrow_forward. Which of the following are true for a bond maturing on a single date when the effective interest method of amortizing bond discount is used?a. interest expense as a percentage of the bond’s carrying amount varies from period to periodb. interest expense increases each six-month period c. interest expense remains constant each six-month periodd. effective interest rate is used to compute for the periodic interest a and b c and d a and d b and carrow_forward
- b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Receivable 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $23,854,460 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bondsarrow_forwardTerms related to long-term debt. Place the letter of the best matching phrase before each word. 1. Indenture 6. Times Interest Earned Ratio Refunding Bonds Issued at Par 2. 7. Mortgage 3. 8. Premium on Bonds Carrying Value Nominal Rate 4. 9. Reacquisition Price 5. 10. Market Rate Requires that bond discount be reported in the balance sheet as a direct deduction from the face of the bond. b. a. Rate set by party issuing the bonds which appears on the bond instrument. The interest paid each period is the effective interest at date of issuance. d. C. Rate of interest actually earned by the bondholders. Results when bonds are sold below par. f. e. Results when bonds are sold above par. The replacement of an existing bond issuance with a new one. g. h. Price paid by issuing corporation for its own bonds. Book value of bonds at any given date. Ratio of current assets to current liabilities. i. k. The bond contract or agreement. 1. Indicates the company's ability to meet interest payments as…arrow_forwardWhen the interest payment dates of a bond are May 1 and November 1,and a bond issue is sold on June 1, the amount of cash received by theissuer will be: a. increased by accrued interest from June 1 to November 1b. increased by accrued interest from May 1 to June 1c. decreased by accrued interest from June 1 to November 1d. decreased by accrued interest from May 1 to June 1arrow_forward
- b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Interest Expense Premium on Bonds Payable v Cash V Feedback V Check My Work The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 3. Determine the total interest expense for 20Y1. Round to the nearest dollar. 2$ 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? Yes 5. Compute the price of $27,440,791 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount 2$ Present value of the semi-annual interest payments Price received for the bondsarrow_forwardOn the maturity date of a bond investment, the journal entry includes ________. A. a debit to Cash and a credit to Held-to-Maturity Debt Investments B. a debit to the Interest Revenue and a credit to Cash C. recording a gain or loss on disposition at maturity D. a debit to Long-term Investments and a credit to Casharrow_forwardSelect the correct answer to each of the following statements. A. Increase B. Decrease C. Remain Constant 1. The amount of interest expense will _______ each payment period for a bond issued at a discount. 2. When a bond is issued at a discount, the cash interest payment will _________ over the life of the bond. 3. When a bond is issued at a premium, the carrying value of the bond will _______ over the life of the bond.arrow_forward
- Please answer all three subparts..thankuarrow_forwardBOND PRICING #2 for Borrowing Money Inc Borrowing Money Inc (BMI) issues a bond on January 1, 2021 with a face valuc of $400,000. The bond has an 7 year maturity date and requires SEMI ANNUAL interest paymerits. The bond's stated interest rate is 3% and the current market interest rate is 2%. Hint: remember to set your expectations PV tables will be needed. Do not round your PVIF, but you may round answers to whole dollars. Prepare the journal entry (in proper form) at issuance of this bond for BMI. Include your journal for grading on your PDF upload. Your multiple step calculations must also be shown To get a preliminary idea of how you did you may enter your calculated amount for cash received at Issuancearrow_forwardWhen bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is: Select one: a. Less than the interest expense b. Equal to the interest expense c. Greater than the interest expense d. More than if the bonds had been sold at a discount e. Less than if the bonds had been sold at a discountarrow_forward
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