Concept introduction:
Bonds:
Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Amortization of Bonds premium or discount:
Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.
Requirement 1:
To prepare:
The
Concept introduction:
Bonds:
Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Amortization of Bonds premium or discount:
Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.
Requirement 2:
To prepare:
The journal entry to record the sale of bonds.
Concept introduction:
Bonds:
Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Amortization of Bonds premium or discount:
Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.
Requirement 3:
To prepare:
The journal entry to record the sale of bonds.
Concept introduction:
Bonds:
Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Amortization of Bonds premium or discount:
Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.
Requirement 4:
To indicate:
The case in which bond yield shall be highest.
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Chapter 9 Solutions
Cornerstones of Financial Accounting
- Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December 31. The bonds have a $31,000 par value and an annual contract rate of 12%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Required: Consider each separate situation. 1. The market rate at the date of issuance is 10%. (a) Complete the below table to determine the bonds' issue price on January 1. (b) Prepare the journal entry to record their issuance. 2. The market rate at the date of issuance is 12%. (a) Complete the below table to determine the bonds' issue price on January 1. (b) Prepare the journal entry to record their issuance. 3. The market rate at the date of issuance is 14%. (a) Complete the below table to determine the bonds' issue price on January 1. (b) Prepare the journal entry to record their…arrow_forwardtELLiy, you must enter your ID number on the first sheet! On January 1, 2020 Omsk Corporation issued Bonds pay interest each July 1 and January 1. 150,000 of 5 % bonds, due in 17 years 12 % market rate of interest. Assume Requirements (Round to 0 decimals, Rounding errors do not matter): 1. Compute market price of bonds. Provide detailed computation. Use functions in Excel 2. What is an amount of discount /premium? Indicate, what it is (discount or premium). Computation. 3. Prepare amortization schedule for first 5 years. Use formulas in Excel. 4. Prepare journal entry to record bond issue. 5. Prepare journal entry on July 1, 2020. 6. Prepare journal entry on December 31, 2020. 7. Prepare journal entry on January 1, 2021arrow_forwardA $500,000 bond issue on which there is an unamortized discount of $35,000, is redeemed for $475,000. What journal entry would you make to record the redemption of the bond? Make it below:arrow_forward
- Waterway Ltd. issued a $1,062,000, 10-year bond dated January 1, 2023. The bond was sold to yield 12% effective interest. The bond paid 10% interest on January 1 and July 1 each year. The company's year-end was December 31, and Waterway followed IFRS. Using 1.factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the amount received for the bond, and any discount or premium on the bond. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1 (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answers to 0 decimal places eg. 58,971.) Proceeds from sale of bond on bond Date $ $ Prepare the journal entries for above transactions. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.…arrow_forwardplease solve step by step if using BA caluculater please explain what values use for what. if using excel show the formula A broker receives an order for three bonds: (a) 7% bond (pays interest on March and September 15) maturing on September 15, 2030; (b) 5.5% bond (pays interest on May and November 1) maturing on May 1, 2035; and (c) 10% bond (pays interest on January and July 8) maturing on July 8, 2025. All three bonds pay semi-annual interest and the current market interest rate is 9% (for all three). What prices would the broker quote for each of the three bonds if the sale is settled on May 4, 2022? (a) Show your work. (b) (c) How much accrued interest would the buyer need to pay on each of the bond? Show your work. How much would the buyer actually pay for each of the bond? Show your work.arrow_forwardPlease help find issue price of bonds Requirements- Using PV function in excel calculate issue price of bonds Prepare effective interest amortization table for bonds through the first three interest payments Record ranking corporations issuance of bonds on March 31 2018. And payment of first semiannual interest amount and amortization of bond and discount on September 30,209. Explanations are not required.arrow_forward
- The notes to the Thorson Ltd.financial statements reported the following data on December 31, Year 1 (end of the fiscal year): Thorson amortizes bond discounts using the effective-interest method and pays all interestamounts at December 31. Requirements1. Assume the market interest rate is 6% on January 1 of year 1, the date the bonds are issued.a. Using the PV function in Excel, what is the issue price of the bonds?b. What is the maturity value of the bonds?c. What is Thorson’s annual cash interest payment on the bonds?d. What is the carrying amount of the bonds at December 31, year 1?2. Prepare an amortization table through the maturity date for the bonds using Excel. (Roundall amounts to the nearest dollar.) How much is Thorson’s interest expense on the bonds forthe year ended December 31, Year 4?3. Show how Thorson would report these bonds and notes at December 31, Year 4.arrow_forwardOn January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?arrow_forwardDixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of discount D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of discountarrow_forward
- Compute bond proceeds, amortizing discount by interest method, and interest expense Boyd Co. produces and sells aviation equipment. On the first day of its fiscal year, Boyd issued $88,000,000 of three-year, 9% bonds at a market (effective) interest rate of 11%, with interest payable semiannually. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Compute the following: The amount of cash proceeds from the sale of the bonds. Round your answer to the nearest dollar. $ fill in the blank 2 The amount of discount to be amortized for the first semiannual interest payment period, using the interest method. Round your answer to the nearest dollar. $ fill in the blank 3 The amount of discount to be amortized for the second semiannual interest payment period, using the interest method. Round your answer to the nearest dollar. $ fill in…arrow_forwardReview 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,…arrow_forwardBased on Question No. 1, I want answer of Question No. 2 On September 1, Deutsch Limited issues 8%, 5-year bonds payable with a maturity value of OR 20,000. The bonds sell at 98 and pay interest on March 1 and September Deutsch amortize bond discount by the straight-line method. Required: Journalize the issuance of the bonds on September 1, and the semiannual interest payment on March 1 and September 1. Answer: Bonds: Bonds are a kind of interest-bearing notes payable, usually issued by companies, universities, and governmental organizations. It is a debt instrument used for the purpose of raising a fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If the selling price of the bond is lesser than the face value, it is known as a discount on bond. If the selling price of the bond is greater than the face value, it is known as premium on bond. 2. What are the two categories of liabilities…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College