On January 1, 2020, Wolf Company issued 10% bonds in the face amount of P5,000,000, which mature on January 1, 2030. The bonds were issued for P5,675,000 to yield 8%, resulting in bond premium of P675,000. The entity used the interest method of amortizing bond premium. Interest is payable annually on December 31. 1. On December 31, 2020, what is the balance of the premium on bonds payable? a. 675,000 b. 629,000 c. 607,500 d. 507,500 What is the carrying amount of bonds payable on December 31, 2020? a. 5,000,000 b. 5,629,000 c. 4,371,000 d. 5,675.000

On January 1, 2020, Wolf Company issued 10% bonds in the face amount of P5,000,000, which mature on January 1, 2030. The bonds were issued for P5,675,000 to yield 8%, resulting in bond premium of P675,000. The entity used the interest method of amortizing bond premium. Interest is payable annually on December 31. 1. On December 31, 2020, what is the balance of the premium on bonds payable? a. 675,000 b. 629,000 c. 607,500 d. 507,500 What is the carrying amount of bonds payable on December 31, 2020? a. 5,000,000 b. 5,629,000 c. 4,371,000 d. 5,675.000

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 14E: Transfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of...

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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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