Amortization Schedule - Bonds Wang Corporation issued $100,000 5 year bonds January 1, 2020. The bonds pay interest annually and have a stated rate of 6%. The market on day of issue was 6%. Required 1 Determine the issue price (PV) of the bond. N (period of time) I (Interest) PV (Present Value FV (Future Value) PMT (Annuity) 2 Prepare the bond amortization schedule using the effective interest method. Cash Interest Interest Year Carrying Value Page 1 Payment Expense Jan 1, 2020 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 3 Record the necessary journal entry at date of issue and first interest payment. General Journal DR CR 4 Analyze the effect on the financial statements of the journal entry at date of issue (a) and the first interest payment (b). Assets = Liabilities + Equity Revenues - Expenses = Net Income

Amortization Schedule - Bonds Wang Corporation issued $100,000 5 year bonds January 1, 2020. The bonds pay interest annually and have a stated rate of 6%. The market on day of issue was 6%. Required 1 Determine the issue price (PV) of the bond. N (period of time) I (Interest) PV (Present Value FV (Future Value) PMT (Annuity) 2 Prepare the bond amortization schedule using the effective interest method. Cash Interest Interest Year Carrying Value Page 1 Payment Expense Jan 1, 2020 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 3 Record the necessary journal entry at date of issue and first interest payment. General Journal DR CR 4 Analyze the effect on the financial statements of the journal entry at date of issue (a) and the first interest payment (b). Assets = Liabilities + Equity Revenues - Expenses = Net Income

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.2P

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Exercise Interest Payments and Interest Expense for Bonds (Straight Line) On January 1, 2020, Perry Manufacturing issued bonds with a total face amount of $3,000,000 and a stated rate of 9%. Required: Calculate the interest expense for 2020 if the bonds were sold at par. Calculate the interest expense for 2020 if the bonds were sold at a premium and the straight- line premium amortization for 2020 is $12,000. 3. Calculate the interest expense for 2020 if the bonds were sold at a discount and the straight- line discount amortization for 2020 is $33,000.
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.
Brief ExerciseBonds Issued at a Premium (Effective Interest) Refer to the information above for Haley Industries. Required: Prepare the journal entry for December 31, 2022 and 2023. Use the following information for Brief Exercises 9-55 and 9-58: Haley Industries issued $120,000 of 11% , 7-year bonds on January 1, 2020, with $5,842 pre- mium. Interest is paid annually on December 31. The market rate of interest is 10%.
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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?
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Short-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.