MC32 On July 1, 2020, Florida Corporation issued at 97 plus accrued interest, 2,000 of its 10%, P1,000 bonds. The bonds are dated April 1, 2020 and mature on April 1, 2028. Interest is payable semi-annually on April 1 and October 1. From the bond issuance, Florida would receive net cash of P1,990,000. P1,965,000. P1,940,000. P1,890,000. а. b. с. d.

MC32 On July 1, 2020, Florida Corporation issued at 97 plus accrued interest, 2,000 of its 10%, P1,000 bonds. The bonds are dated April 1, 2020 and mature on April 1, 2028. Interest is payable semi-annually on April 1 and October 1. From the bond issuance, Florida would receive net cash of P1,990,000. P1,965,000. P1,940,000. P1,890,000. а. b. с. d.

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 3E

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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.
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