On January 1, 2025, Bonita Company purchased 12% bonds having a maturity value of $276.000 for $296,924.88. The bonds providethe bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 ofeach year. Bonita Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classifiedas available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows202520262027(D)(b)(c)No.(0)$294.800 2028 $286,100$285,000 2029$284,100(List all debit entries before credit entries. Credit account tities are automatically indented when amount is entered. Do not lodent manually. Ifno entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to 2 decimal places, e.g. 1225.25)Account Titles and Explanation(b)Prepare the journal entry at the date of the bond purchase.Prepare the journal entries to record the interest revenue and recognition of fair value for 2025.Prepare the journal entry to record the recognition of fair value for 2026.DateJan 1, 2025Dec 31, 2025 v$276.000Dec. 31, 2025Dec 31, 2026 V(To record interest received)(To record fair value adjustment)DebitCred

Bonds are fixed-income securities or debt instruments that are issued by corporations, governments,…

On January 1, 2025, Bonita Company purchased 12% bonds having a maturity value of $276.000 for $296,924.88. The bonds provide he bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of nach year. Bonita Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified s available for-sale category. The fair value of the bonds at December 31 of each year-end is as follows 2025 $294.800 2028 2026 $285,000 2029 2027 $284,100 (a) (b) (c) $286,100 $276.000 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not lndent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts Round onovers to 2 decimal places, eg 1225.25)

On January 1, 2025, Bonita Company purchased 12% bonds having a maturity value of $276.000 for $296,924.88. The bonds provide he bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of nach year. Bonita Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified s available for-sale category. The fair value of the bonds at December 31 of each year-end is as follows 2025 $294.800 2028 2026 $285,000 2029 2027 $284,100 (a) (b) (c) $286,100 $276.000 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not lndent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts Round onovers to 2 decimal places, eg 1225.25)

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 16E

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Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any 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. Assume the company retires the bonds on June 30, 2020, at 103 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
On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.
On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?