domestic Exercise 14-28 (Algo) Bonds with detachable warrants (LO14-5]On August 1, 2021, Limbaugh Communications issued $35 million of 10 % nonconvertible bonds at 102. The bonds are due on July 31,2041. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60,one share of Limbaugh Communications' no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1,2021, the market value of the common stock was $58 per share and the market value of each warrant was $6.In February 2032, when Limbaugh's common stock had a market price of $70 per share and the unamortized discount balance was $1million, Interstate Containers exercised the warrants it held.Required:1. Prepare the journal entries on August 1, 2021, to record (a) the issuance of the bonds by Limbaugh and (b) the investment byInterstate.2. Prepare the journal entries for both Limbaugh and Interstate in February 2032, to record the exercise of the warrants.

Bonds -Bonds are investment securities in which a buyer lends money to a government agency or…

1. Prepare the journal entries on August 1, 2021, to record (a) the issuance of the bonds by Limbaugh and (b) the investment by Interstate. 2. Prepare the journal entries for both Limbaugh and Interstate in February 2032, to record the exercise of the warrants.

1. Prepare the journal entries on August 1, 2021, to record (a) the issuance of the bonds by Limbaugh and (b) the investment by Interstate. 2. Prepare the journal entries for both Limbaugh and Interstate in February 2032, to record the exercise of the warrants.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 68E: Exercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on...

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Exercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on January 1, 2020. Interest is paid annually on December 31. The principal and the final interest payment are due on December 31, 2021. Required: Prepare the entry to recognize the issuance of the bonds. Prepare the journal entry for December 31, 2020. Prepare the journal entry to record repayment of the principal on December 31, 2021. CONCEPTUAL CONNECTIONHow would the interest expense for 2020 change if the bonds had been issued at a premium?
Exercise 14-28 (Algo) Bonds with detachable warrants [LO14-5] On August 1, 2021, Limbaugh Communications issued $35 million of 10% nonconvertible bonds at 102. The bonds are due on July 31, 2041. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60, one share of Limbaugh Communications' no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2021, the market value of the common stock was $58 per share and the market value of each warrant was $6. In February 2032, when Limbaugh's common stock had a market price of $70 per share and the unamortized discount balance was $1 million, Interstate Containers exercised the warrants it held. Required: 1. Prepare the journal entries on August 1, 2021, to record (a) the issuance of the bonds by Limbaugh and (b) the investment by Interstate. 2. Prepare the journal entries for both Limbaugh and Interstate in February 2032, to record the exercise of…
Exercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and Retirement (LO10-5, LO10-6) Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the following journal entries. a. April 1, 2021, to record the issuance of the bonds. b. September 30, 2021, to pay interest and to amortize the bond premium. c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities. (ignore possible income tax effects.) (If no entry is required for a transaction/event,…
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uestion 3 B. Corporation issued $10 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041. B. Corp.'s fiscal year ends on December 31. Prepare the following journal entries. a- April 1, 2021, to record the issuance of the bonds. b-September 30, 2021, to pay interest and to amortize the bond premium. c- March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).
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