Answered: P 10–6 A 3‐year $1,000,000, 10% bond… | bartleby

P 10–6 A 3‐year $1,000,000, 10% bond issue was authorized for Mega Corporation on April 1, 2019. Interest is payable on March 31 and September 30. The year‐end of the Corporation is December 31. Required: Consider the following independent cases: 1. The Mega Corporation issued the bonds on April 1, 2019, at 97. Prepare the journal entries required on April 1, 2019, September 30, 2019, and December 31, 2019. Assume straight‐line amortization. 2. The bonds are issued at 106 on April 1, 2019. Prepare the journal entries to record the sale of the bonds on April 1, 2019, and entries required on September 30, 2019, and December 31, 2019 3. The bonds are not issued

Accounting

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter17: Financial Statement Analysis

Section: Chapter Questions

Problem 17.8EX: Current position analysis The bond indenture for the 10-year, 9% debenture bonds issued January 2,...

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P 10–6 A 3‐year $1,000,000, 10% bond issue was authorized for Mega Corporation on April 1, 2019. Interest is payable on March 31 and September 30. The year‐end of the Corporation is December 31. Required: Consider the following independent cases: 1. The Mega Corporation issued the bonds on April 1, 2019, at 97. Prepare the journal entries required on April 1, 2019, September 30, 2019, and December 31, 2019. Assume straight‐line amortization. 2. The bonds are issued at 106 on April 1, 2019. Prepare the journal entries to record the sale of the bonds on April 1, 2019, and entries required on September 30, 2019, and December 31, 2019 3. The bonds are not issued

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Current position analysis The bond indenture for the 10-year, 9% debenture bonds issued January 2, 20Y5, required working capital of 100,000, a current ratio of 1.5, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 20Y6, the three measures were computed as follows: 1. Current assets: Cash...................................... 102,000 Temporary investments.................... 48,000 Accounts and notes receivable (net)......... 120,000 Inventories................................ 36,000 Prepaid expenses.......................... 24,000 Intangible assets.......................... 124,800 Property, plant, and equipment............. 55,200 Total current assets (net)................ 510,000 Current liabilities: Accounts and short-term notes payable..... 96,000 Accrued liabilities.......................... 204,000 Total current liabilities.................. 300,000 Working capital............................. 210,000 2. Current ratio................................ 1.7 510,000 300,000 3. Quick ratio.............................................. 1.2 115,200 96,000 a. List the errors in the determination of the three measures of current position analysis. b. Is the company satisfying the terms of the bond indenture? Explain.
Entries for bonds payable, including bond redemption The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1. July 1 Issued 74,000,000 of 20-year, 11 % callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of 63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 3 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is 9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Instructions 1. Journalize the entries to record the transactions. (Round all amounts to the nearest dollar.) 2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2. 3. Determine the carrying amount of the bonds as of December 31, Year 2.

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