The founder of Frenza asks us to assist her in accounting and analysis of the corporation's bonds, which have an annual contract rateof 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance thegrowth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations forher business decisions.$100,000$80,000$60,000$40,000$20,000$OFrenza Bond AmortizationHJanuary 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31,1Year 1Year 2Year 3Cash & Inventory forCompeting CompaniesFrenzaLikaNelo10%Carrying ValueUnamortized DiscountMarket Rate for CompanyBonds(Frenza) Cash & Inventory forCompeting CompaniesFrenza$50,000$40,000$30,000$20,000$10,000$0CashInventoryCashLikaInventoryCashNeloInventory10%8%6%4%2%0%Market Rate for CompanyBondsFrenzaNet IncomeTotal Equity & Net IncomeFrenzaLika$100,000$190,000Total EquityLika$400,000$530,000NeloKNelo$85,000$275,000#+ableau1(a). Prepare journal entries to record the issuance of Frenza bonds on January 1, Year 1.1(b). Prepare journal entries to record the first and second interest payments on June 30, Year 1, and December 31, Year 1.1(c). Prepare journal entries to record the maturity of the bonds on December 31, Year 3.2. Frenza needs to raise money to purchase new equipment. The founder is concerned about losing ownership control of hercompany. Which of the following ways to raise money would we recommend?3. Frenza needs to raise money to purchase more inventory. The founder is concerned about the company's ability to make requiredcash payments when cash flows are low. Which of the following ways to raise money would we recommend?ņ O

Requirement 1 a) :— Statement Showing Journal entry to record the issuance of Frenza bonds on…

1(a). Prepare journal entries to record the issuance of Frenza bonds on January 1, Year 1. 1(b). Prepare journal entries to record the first and second interest payments on June 30, Year 1, and December 31, Year 1. 1(c). Prepare journal entries to record the maturity of the bonds on December 31, Year 3. 2. Frenza needs to raise money to purchase new equipment. The founder is concerned about losing ownership control of her company. Which of the following ways to raise money would we recommend? 3. Frenza needs to raise money to purchase more inventory. The founder is concerned about the company's ability to make required cash payments when cash flows are low. Which of the following ways to raise money would we recommend?

1(a). Prepare journal entries to record the issuance of Frenza bonds on January 1, Year 1. 1(b). Prepare journal entries to record the first and second interest payments on June 30, Year 1, and December 31, Year 1. 1(c). Prepare journal entries to record the maturity of the bonds on December 31, Year 3. 2. Frenza needs to raise money to purchase new equipment. The founder is concerned about losing ownership control of her company. Which of the following ways to raise money would we recommend? 3. Frenza needs to raise money to purchase more inventory. The founder is concerned about the company's ability to make required cash payments when cash flows are low. Which of the following ways to raise money would we recommend?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 7EB: McMasters Inc. specializes in BBQ accessories. In order for the company to expand its business, they...

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McMasters Inc. specializes in BBQ accessories. In order for the company to expand its business, they take out a long-term loan in the amount of $800,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 9%. Each year on December 31, the company pays down the principal balance by $50,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.
The founder of Frenza asks us to assist her in accounting and analysis of the corporation’s bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations for her business decisions. 1. Based on the current market rates for bonds of Frenza, Nelo, and Lika, which of the following bonds do lenders believe has the highest risk level?2. If Frenza decided to issue new bonds with a contract rate of 11%, would these new bonds be sold at a discount or premium based on the current market rate for Frenza bonds?3. Frenza is planning an $160,000 expansion to launch a new product line. Frenza currently earns $100,000 in net income, and the new product line will yield $50,000 in additional income before any interest expense. Frenza has three options: (1) do not expand, (2)…
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