Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter A, Problem 1E
1.
To determine
Journalize the purchase of bond investment on July 1.
2.
To determine
Journalize the interest revenue on bond investment on December 31.
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A corporation issued bonds on January 1, 2018 with the following terms:
Face Value: $500,000
Coupon Rate of Interest 8%,
Term: 10 years
What is the total cost of borrowing on this bond?
O O O O O
A.
$437,740
$400,000
$462,260
$584,100
E. $655,220
B.
Interest: Semi-annual payments on June 30 and December 31
Market Rate of Interest 10%
C.
D.
SM Corporation issued a 5-year 9.5% P1,000,000 face value bonds to YG Corporation in an 8.16% market on January 1, 2022, paying interest annually.
1. What is the book value of the bond on year 5?
2. How much cash was credited from SM's account upon the bond's maturity?
Bond Interest ExpenseDuring the current year, Evans & Sons, Inc., issued $400 million of zero-coupon bonds, due in seven years. The proceeds from the bond issuance were $184.2 million.
Calculate the total interest expense that the company will incur over the life of the bonds.$Answermillion
Chapter A Solutions
Financial Accounting
Ch. A - Prob. 1QCh. A - Explain the difference in accounting methods used...Ch. A - Explain how bonds held to maturity are reported on...Ch. A - Explain the application of the cost principle to...Ch. A - Under the fair value method, when and how does the...Ch. A - Under the equity method, why does the investor...Ch. A - Prob. 7QCh. A - Prob. 8QCh. A - Prob. 9QCh. A - Company X owns 40 percent of Company Y and...
Ch. A - Prob. 2MCQCh. A - Dividends received from stock that is reported as...Ch. A - Prob. 4MCQCh. A - Prob. 5MCQCh. A - When using the equity method of accounting, when...Ch. A - Prob. 7MCQCh. A - Prob. 8MCQCh. A - Which of the following is true regarding the...Ch. A - Prob. 10MCQCh. A - Matching Measurement and Reporting Methods Match...Ch. A - Prob. 2MECh. A - Prob. 3MECh. A - Prob. 4MECh. A - Prob. 5MECh. A - Prob. 6MECh. A - Prob. 7MECh. A - Prob. 8MECh. A - Prob. 9MECh. A - Prob. 10MECh. A - Prob. 11MECh. A - Prob. 1ECh. A - Prob. 2ECh. A - Recording Transactions in the Available-for-Sale...Ch. A - Prob. 4ECh. A - Prob. 5ECh. A - Reporting Gains and Losses in the Trading...Ch. A - Prob. 7ECh. A - Prob. 8ECh. A - Prob. 9ECh. A - Prob. 10ECh. A - Prob. 11ECh. A - Prob. 1PCh. A - Prob. 2PCh. A - Prob. 3PCh. A - Prob. 4PCh. A - Prob. 5PCh. A - Comparing Methods to Account for Various Levels of...Ch. A - Prob. 7PCh. A - Recording Investments for Significant Influence LO...Ch. A - Prob. 9PCh. A - Prob. 10PCh. A - Prob. 11PCh. A - Prob. 1APCh. A - Prob. 2APCh. A - Reporting Passive Investments During January 2017,...Ch. A - Prob. 4APCh. A - Prob. 5APCh. A - Prob. 6APCh. A - Prob. 1CONCh. A - Finding Financial Information Refer to the...Ch. A - Prob. 2CPCh. A - Prob. 3CPCh. A - Prob. 4CPCh. A - Prob. 5CPCh. A - Prob. 6CP
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- Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date. Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was received upon issuance?arrow_forwardPinetop Corporation issued $150,000 10-year bonds at par. The bonds have a stated rate of 6% and pay interest annually. What is the journal entry to record the sale of the bonds?arrow_forwardSaverin, Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin, Inc. issued 62,500,000 of 10-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of 66,747,178. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 2016, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.) b. The interest payment on June 30, 2017, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.) 3. Determine the total interest expense for 2016.arrow_forward
- Subject: accountingarrow_forwardA company issues $12 million in term bonds on March 1, Year One, for face value. The bonds pay a stated cash interest rate of 10 percent per year. Interest payments are made every February 28 and August 31. What is the amount of interest payable reported on the December 31, Year One, balance sheet? Responses $600,000 $1,000,000 $400,000 $1,200,000arrow_forwardQUESTION INFORMATION: Prior to 2022, a company issued bonds with a face value of $200,000, a stated rate of 10%, and a market rate of 12%. Interest is paid on December 31 of each year. As of December 31, 2022, the bonds had a carrying amount of $180,000. One year later, following the December 31, 2023 annual interest payment, the company called the bonds for 101% of face value. QUESTION TO ANSWER: The loss that the company records on the early extinguishment of the bonds is $_arrow_forward
- A company issues $12 million in term bonds on March 1, Year One, for face value. The bonds pay a stated cash interest rate of 10 percent per year. Interest payments are made every February 28 and August 31. On financial statements for Year One, what is recognized as interest expense on the income statements? Responses $12,000,000 $300,000 $1,200,000 $1,000,000arrow_forwardAnalyzing and Reporting Financial Statement Effects of Bond Transactions On January 1 of the current year, Trueman Corporation issued $400,000 of 20-year, 11% bonds for $369,908, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31. (a) Confirm the bond issue price. Round your answers to the nearest whole number. Present value of principal repayment $ Present value of interest payments $ Selling price of bonds (b) Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payment and discount amortization on June 30, and (3) semiannual interest payment and discount amortization on December 31 of the current year. $369,908 Round answers to nearest whole number. Use negative signs with answers, when appropriate. Balance Sheet Transaction Cash Asset + (1) (2) (3) Noncash Assets = Liabilities + Contributed Capital + Earned Capital Revenue Income Statement - Expenses = Net Incomearrow_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_forward
- Accounting for Bonds Sold at a Discount The Peoples National Bank raised capital through the sale of $60 million face value of four percent coupon rate, ten-year bonds. The bonds paid interest semiannually and were sold at a time when equivalent risk-rated bonds carried a yield rate of six percent. Round all answers to the nearest whole number. a. Calculate the proceeds that The Peoples National Bank received from the sale of the six percent bonds. $ 51,073,515 b. Calculate the interest expense on the bonds for the first year that the bonds are outstanding. $2,400,000 X c. Calculate the book value of the bonds at the end of the first year. $ 51,966,164 X Previousarrow_forwardClassifying Bond Transactions- Direct Method Cambell Inc. issued $180,000, 6%, 10-year bonds on January 1, for $155,844, with interest payments due annually at the end of each year. The amount of the discount amortization in year one is $1,667 using the effective interest method. Indicate the impact on the (a) operating activities section and the (b) financing activities section of the statement of cash flows, assuming the direct method in presenting cash flows from operating activities. • Note: Indicate a subtraction in the statement of cash flows with a negative sign in the Amount column. • Note: If an item is not included in the statement of cash flows, enter zero (leave blank) in the Amount column, and enter "N/A" in the Cash Flow Section column. Item Cash payment of interest Amortization of discount on bonds payable $ Issuance of bonds payable $ Amount Cash Flow Section 0 * N/A 1,667 * Operating activities section 155,844✓ Financing activities section X Xarrow_forwardNeed helparrow_forward
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