Company A has convertible notes on issue. These notes are convertible to ordinary shares of the Company after 3 years. The distributions made to the note holders by Company A are classified by Company A as follows:
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- A Co. is authorized to issue P5,000,000 of 6%, 10 year bonds dated July 1, 2021 with interest payments on June 30 and December 31. When the bonds are issued on November 1, 2021, the entity received cash of P5,150,000 including accrued interest. What amount was recorded as discount or premium on bonds payable? a. 150,000 bond discount b. 50,000 bond premium c. no bond premium or discount d. 150,000 bond premiumPatrick Rach International issued 5% bonds convertible into shares of the company's common stock. Rach applies International Financial Reporting Standards (IFRS). Upon issuance, Patrick Rach International should record the proceeds of the bond issue in what manner?On January 1, 2021, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2022. The 2021 income statement reported $2,200 in interest revenue from this note and a $6,000 gain on sale of investment in stock. The stock’s book value was $16,000. The company’s fiscal year ends on December 31.Required:1. What is the note’s effective interest rate?2. Reconstruct the journal entries to record the sale of the stock on January 1, 2021, and the adjusting entry to record interest revenue at the end of 2021. The company records adjusting entries only at year-end.
- On January 1, Year 1, Burton Corporation issued bonds with a face value of $200,000 for $196,000 cash.: Which of the following correctly describes the related transaction? Multiple Choice Burton issued bonds at 98. Burton signed a note payable for $196,000. Burton issued bonds at 102. Burton issued bonds at a $4,000 premium.Madison Corporation is authorized to issue $820,000 of 5-year bonds dated June 30, Year 1, with a stated rate of interest of 11%. Interest on the bonds is payable semiannually, and the bonds are sold on June 30, Year 1. Required: Determine the proceeds that the company will receive if it sells the following: (Click here to access the tables to use with this exercise and round your answers to two decimal places, if necessary.) 1. The bonds to yield 12% $fill in the blank 1 2. The bonds to yield 10% $fill in the blank 2During Year 1 and Year 2, Kale Co. completed the following transactions relating to its bond issue. The company’s fiscal year ends on December 31. Year 1 Mar. 1 Issued $200,000 of 8 year, 6 percent bonds for $194,000. The semiannual cash payment for interest is due on March 1 and September 1, beginning September Year 1. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. Year 2 Mar. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Sept. 1 Recognized interest expense including the amortization of the discount and made the semiannual cash payment for interest. Dec. 31 Recognized accrued interest expense including the amortization of the discount. Prepare the liabilities section of the balance sheet at December…
- At the beginning of the current year, two bond issues (Simmons Industries 7%, 20-year bonds and Hunter Corporation 8%, 10-year bonds) were outstanding. During the year, the Simmons Industries bonds were redeemed and a significant loss on the redemption of bonds was reported as cost of merchandise sold on the income statement. At the end of the year, the Hunter Corporation bonds were reported as a noncurrent liability. The maturity date on the Hunter Corporation bonds was early in the following year.Identify the flaws in the reporting practices related to the two bond issues.An entity issued ten-year P1,000,000 debenture bonds at the beginning of the current year. The bonds pay interest semiannually on June 30 and December 31. The entity used the effective interest method to amortize bond premium and discount. The carrying amount of the bonds on this date was P886,000. A journal entry was recorded for the first interest payment on June 30, debiting interest expense for P53,160 and crediting cash for P50,000. What is the annual stated interest rate for the debenture bond?Bonds Payable has a balance of $1,091,000 and Discount on Bonds Payable has a balance of $13,092. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption?
- On April 1, 20x1, an entity issues bonds with face amount of P5,000,000 for P5,415,183, including accrued interest. The bonds are dated January 1, 20x1 and pay annual interest of 14% every December 31. The effective interest rate is 12%. Requirements: a. Compute for the interest expense in 20x1.If the company issued RO 100,000 , 5% interest, 10-year bonds at 98 on January 1, 2021, which of the following is the correct accounting entry on the date of issuance? a. the company will record premium on bonds payable, RO 200 b. the company will record discount on bonds payable, RO 2,000 c. the company will record premium on bonds payable, RO 2,000 d. the company will record discount on bonds payable, RO 200On January 1, Year 1, Hanover Corporation issued bonds with a $56,500 face value, a stated rate of interest of 9%, and a 5-year term o maturity. The bonds were issued at 99. Hanover uses the straight-line method to amortize bond discounts and premiums. Interest is payable in cash on December 31 each year. How much interest expense will Hanover report on its income statement on December 31, Year 1? Multiple Choice O оо $113 $5,198 $5,085 $565