CHALLENGE PROBLEM
This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter.
On April 1, 20-1, Rebound Co. issued $300,000 of 10%, 10-year bonds, callable at 105 after three years, at face value. On April 1, 20-4, after completing three years of interest payments on the bonds, Rebound is considering calling the bonds and issuing $300,000 of new 8%, 10-year bonds at face value. The current market interest rate is only 8%, so Rebound thinks it might save money by taking this action.
REQUIRED
1. Compute the net savings to Rebound over the life of the original bond issue if it calls the old bonds and issues the new bonds.
2. Assuming Rebound calls the original bond issue, prepare the
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College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
- Knowledge Check 01 On January 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issued at face value. The bonds have a stated interest rate of 8% and pay interest once per year on December 31. Prepare the appropriate journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) - View transaction list View journal entry worksheet No 1 Transaction A Gain on Bond Retirement Interest Expense General Journal Debit 104,000 Credit 8,000 Ⓒarrow_forwardAnswer in step by step solutionarrow_forwardHi, I need help determining the answer to this question. Thank you.arrow_forward
- *see attached How much interest expense is to be reported in its 2022 income statement? a. P 63,483b. P 52,924c. P 56,011d. P 70,000arrow_forwardUse the following to answer questions 4-7 (Round answers to the nearest dollar) The company issues 7.4%, 5-year bonds with a total face amount of $100,000. The market interest rate for bonds of similar risk and maturity is 7.6%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET (input your answers after you've completed the entire problem). 5. 7. will S expense? S payment? (rounded to nearest dollar). What is the issue price of the bond? (rounded to nearest dollar). When the company records the first interest payment, how much record company for interest. the (rounded to nearest dollar). What is the bond liability (carrying amount) after the first interest (rounded to nearest dollar). When the company records the second interest payment, how much will the company record for interest expense?arrow_forwardPlease do not give solution in image format ?arrow_forward
- Prepare transactions according to the Generally Accepted Accounting Principles. please answer with computation , explanation , formula answer in text please answer correctly and completely thanksarrow_forwardDon't give answer in imagearrow_forwardView Policies Current Attempt in Progress Marigold Corporation issues $ 430,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Click here to view factor tables. Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g 1.25124 and the final answer to 0 decimal places eg, 58,971.) Issue price of the bonds %24arrow_forward
- 3. On 1/1/21, Your Company issued $250,000 of 6% bonds, dated 1/1/21. The bonds pay interest annually on December 31st. The yield is 8%. They mature in three years on 12/31/23. The bonds were issued for $237,115. Be sure to show the date of each journal entry. The 'right' journal entry on the 'wrong' date is wrong. а. Prepare an amortization table Prepare thejournal entry for 1/1/21 Prepare thejournal entry for 12/31/21 b. с. Amortization table: CV 8% Interest Payment Amortization Discount CV 12/31/20 12/31/21 12/31/22 Journal entries: Debits Credits 1/1/21 12/31/21arrow_forwardSubject - accountarrow_forwardPreparing a Bond Amortization Table (Straight Line) Campton Company issued 5-year, 7.5% bonds with a total face value of $900,000 January 1 for $944,000. The bonds pay interest on June 30 and December 31 of each year. Required: 1. Prepare an amortization table. If an amount box does not require an entry, leave it blank and if the answer is zero, enter "0". Campton Company Amortization Table Cash Interest Premium on Payment Expense Bonds Payable (Credit) (Debit) Period At issue $ 6/30/X1 12/31/X1 6/30/X2 12/31/X2 6/30/X3 12/31/X3 6/30/X4 12/31/X4 6/30/X5 12/31/X5 (Debit) Premium on Bonds Payable Carrying Balance Value 2. Prepare the entries to recognize the interest payments made on June 30 and December 31 of Year 1. If an amount box does not require an entry, leave it blank. If an amount box does not require an entry, leave it blank. 20X1 June 30 20X1 Dec. 31 Record interest expense Record interest expense BB 88arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College