On January 1, 2020, Swifty Company sold 12% bonds having a maturity value of $450.000 for $484,117. which provides thebondholders with a 10% yield. The bonds are dated January 1,2020, and mature January 1.2025, with interest payable December 31of each year. Swifty Company allocates interest and unamortized discount or premium on the effective-interest basis,(a)Your answer is correct.Prepare the journal entry at the date of the bond issuance. (Round answer to O decimal places, eg 38,548. If no entry is required,select "No Entry for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount isentered. Do not indent manually)DateAccount Titles and ExplanationDebitCreditJanuary 1.2020Cash484117Bonds Payable450000Premium on Bonds Payable34117Attempts. 2 of3 used(b)Prepare a schedule of interest expense and bond amortization for 2020-2022. Round answer to O decimal places, e 3854)Schedule of Interest Expense and Bond Premium AmortizationEffective-Interest MethodCashDateInterestPremiumCarryAmount olPaidExpenseAmortized1/1/2012/31/2012/31/2112/31/22Prepare a schedule of interest expense and bond amortization for 2020-2022. (Round answer to 0 decimal ploces, es 38,548)Schedule of Interest Expense and Bond Premium AmortizationEffective-Interest MethodCashInterestPremiumAmortizedCarryingAmount of BondsPaidExpense

Solution: When stated interest rate is higher than market interest rate than bonds are issued at…

On January 1. 2020, Swifty Company sold 12% bonds having a maturity vallue of $450.000 for $484,117, which provides the bondholders with a 10% yield. The bonds are dated January 1,2020, and mature January 1.2025, with interest payable December 31 of each year. Swifty Company allocates interest and unamortized discount or premium on the effective interest basis, (a) Your answer is correct. Prepare the journal entry at the date of the bond issuance. (Round answer to O decimal places, eg 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are outomatically indented when amount is entered. Do not indent manually)

On January 1. 2020, Swifty Company sold 12% bonds having a maturity vallue of $450.000 for $484,117, which provides the bondholders with a 10% yield. The bonds are dated January 1,2020, and mature January 1.2025, with interest payable December 31 of each year. Swifty Company allocates interest and unamortized discount or premium on the effective interest basis, (a) Your answer is correct. Prepare the journal entry at the date of the bond issuance. (Round answer to O decimal places, eg 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are outomatically indented when amount is entered. Do not indent manually)

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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Similar questions

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?
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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?