11.5 (LO 2) The following section is taken from Ohlman Ltd.'s. statement of financial position December 31, 2019. Non-current liabilities Bonds payable, 7%, due January 1, 2024 HK$16,000,000 Current liabilities Interest payable 1,120,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. Instructions a. Journalize the payment of the bond interest on January 1, 2020. b. Assume that on January 1, 2020, after paying interest, Ohlman calls bonds having a face value HKS6,000,000. The call price is 103. Record the redemption of the bonds. c. Prepare the entry to record the accrual of interest on December 31, 2020.

11.5 (LO 2) The following section is taken from Ohlman Ltd.'s. statement of financial position December 31, 2019. Non-current liabilities Bonds payable, 7%, due January 1, 2024 HK$16,000,000 Current liabilities Interest payable 1,120,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. Instructions a. Journalize the payment of the bond interest on January 1, 2020. b. Assume that on January 1, 2020, after paying interest, Ohlman calls bonds having a face value HKS6,000,000. The call price is 103. Record the redemption of the bonds. c. Prepare the entry to record the accrual of interest on December 31, 2020.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 5P: Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and...

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Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
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