Dengar Presented below is a partial amortization schedule for Discount Pizza.(2)(1)PeriodCash Paid for(3)InterestInterestExpense(4)Increase inCarrying Value(5)CarryingValueIssue Date$55,73612$1,8001,800$1,9511,956$15155,88715656,043Required:1. & 2. Record the bond issue and first interest payment assuming the face amount of bonds payable is $60,000.3. Interest expense increases each period because the carrying value of the debt issued at a discount increases over time.

REQUIREMENT ( 1 ) & ( 2 ) Bond is issued on discount when it pays Interest Lower than the…

Answered: Presented below is a partial…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.1E

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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.
Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 31.12.14 31.12.15 31.12.16Amortized Cost Tk. 491,150 519,442 550000Fair Value Tk. 497,000 509,000 550000Required:(a) Indicate whether the bonds were purchased at a discount or at a premium.(b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2014. The Fair Value Adjustment account has a debit balance of Tk. 1,000 prior to adjustment.(c) Prepare the adjusting entry to record the bonds at fair value at December 31, 2016
Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/20 12/31/21 12/31/22 Amortized cost $491,150 $519,442 $550,000 Fair value 497,000 509,000 550,000 Instructions a. Indicate whether the bonds were purchased at a discount or at a premium. b. Prepare the adjusting entry to record the bonds at fair value at December 31, 2020. The Fair Value Adjustment account has a debit balance of $1,000 prior to adjustment. c. Prepare the adjusting entry to record the bonds at fair value at December 31, 2021.
A serial bond repayment plan involves a(n) Group of answer choices A. series of installments to retire the debt over the life of the issue. B. early redemption of all debt. C. lump-sum payment at maturity. D. conversion of debt to common stock.
(Debt Investments) Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/17 12/31/18 12/31/19 Amortized cost $491,150 $519,442 $550,000 Fair value 497,000 509,000 550,000 Instructions(a) Indicate whether the bonds were purchased at a discount or at a premium.(b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2017. The Fair Value Adjustment account has a debit balance of $1,000 prior to adjustment.(c) Prepare the adjusting entry to record the bonds at fair value at December 31, 2018.
Presented below is an amortization schedule related to Spangler Company's 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2018, for $108,660. Date Cash Received Interest Revenue Bond PremiumAmortization Carrying Amount of Bonds 12/31/18 $108,660 12/31/19 $7,000 $5,433 $1,567 107,093 12/31/20 7,000 5,354 1,646 105,447 12/31/21 7,000 5,272 1,728 103,719 12/31/22 7,000 5,186 1,814 101,905 12/31/23 7,000 5,095 1,905 100,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $107,093 $105,447 $103,719 $101,905 $100,000 Fair value 106,500 107,500 105,650 103,000 100,000 Instructions a. Prepare the journal entry to record the purchase of these bonds on December 31, 2018, assuming…
Presented below is a partial amortization schedule for Discount Pizza.1. Record the bond issue assuming the face amount of bonds payable is $70,000. 2. Record the first interest payment. 3. Explain why interest expense increases each period.
Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Pricing bonds Bond prices depend on the market rate of interest, stated rate of interest and time. Requirements Compute the price of the following 8% bonds of Country Telecom. $100,000 issued at 75.25 $100,000 issued at 94.50 $100,000 issued at 103 50 $100,000 issued at 94.50 $100,000 issued at 103.25 2. Which bond will Country Telecom have to pay the most to retire at maturity? Explain your answer.
Presented below is an amortization schedule related to Bramble Company’s 5-year, $ 170,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $ 185,137. Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds 12/31/18 $ 185,137 12/31/19 $ 10,200 $ 7,405 $ 2,795 182,342 12/31/20 10,200 7,294 2,906 179,436 12/31/21 10,200 7,177 3,023 176,413 12/31/22 10,200 7,057 3,143 173,270 12/31/23 10,200 6,930 3,270 170,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $ 182,342 $ 179,436 $ 176,413 $ 173,270 $ 170,000 Fair value $ 181,700 $ 181,600 $ 178,300 $ 174,400 $ 170,000 (a) Prepare the journal entry to record the purchase of these bonds on…
Presented below is an amortization schedule related to Bramble Company’s 5-year, $ 170,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $ 185,137. Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds 12/31/18 $ 185,137 12/31/19 $ 10,200 $ 7,405 $ 2,795 182,342 12/31/20 10,200 7,294 2,906 179,436 12/31/21 10,200 7,177 3,023 176,413 12/31/22 10,200 7,057 3,143 173,270 12/31/23 10,200 6,930 3,270 170,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $ 182,342 $ 179,436 $ 176,413 $ 173,270 $ 170,000 Fair value $ 181,700 $ 181,600 $ 178,300 $ 174,400 $ 170,000 (d) Prepare the journal entry to record the purchase…
Presented below is a partial amortization schedule for Premium Pizza.1. Record the bond issue assuming the face amount of bonds payable is $70,000. 2. Record the first interest payment. 3. Explain why interest expense decreases each period.
Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Pricing bonds Bond prices depend on the market rate of interest, stated rate of interest and time. Requirements Compute the price of the following 8% bonds of Country Telecom. a. $100,000 issued at 75.25 $100,000 issued at 94.50 b. $100,000 issued at 103 50 c. $100,000 issued at 94.50 d. $100,000 issued at 103.25 2. Which bond will Country Telecom have to pay the most to retire at maturity? Explain your answer.

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