On January 1, 2026, Manson Corporation issued $3-million 10-year bonds. The bonds paysemi-annual interest on July 1 and January 1, and Manson has a December 31, year-end.Presented below is a partial amortization table:Semi AnnualInterestPeriodJan 1, 2026July 1, 2026Jan 1, 2027July 1, 2027Jan 1, 2028July 1, 2028Jan 1, 2029Interestpayment1$75,000[3]75,00075,00075,00075,000Interestexpense[2]64,70464,49864,28864,07363,855Amortization$10,09510,29610,502[4]10,92711,145BondAmortizedCost[1]3,235,1773,224,8813,214,379[5]3,192,7403,181,595Required:Set up a table in MS Excel with all relevant information. Use the table to answer the followingquestions in MS Excel. Use Excel formulas to support your calculation whenever possiblea. Were the bonds issued at a discount or premium? How do you know?b. What is the face value of the bonds?c. What is the contractual rate of interest?d. Calculate the missing amounts for items [1] through [5] in the amortization tablee. What was the market interest rate when the bonds were issued?f. Prepare the journal entry to record the issue the bonds on January 1, 2026g. Prepare the journal entry to record the first interest payment on July 1, 2026h. Prepare the journal entry to record the accrual of interest on December 31, 2026i. What amounts would be reported as current and as noncurrent liabilities on Manson'sDecember 31, 2026, balance sheet?I

Bonds - Bonds are fixed-income securities that reflect loans from investors to borrowers (typically…

Presented below is a partial amortization table: Semi Annual Interest Period Jan 1, 2026 July 1, 2026 Jan 1, 2027 July 1, 2027 Jan 1, 2028 July 1 2028 Interest payment $75,000 [3] 75,000 75,000 75.000 Interest expense [2] 64,704 64,498 64,288 64.070 Amortization $10,095 10,296 10,502 [4] 207 Bond Amortized Cost [1] 3,235,177 3,224,881 3,214,379 [5]

Presented below is a partial amortization table: Semi Annual Interest Period Jan 1, 2026 July 1, 2026 Jan 1, 2027 July 1, 2027 Jan 1, 2028 July 1 2028 Interest payment $75,000 [3] 75,000 75,000 75.000 Interest expense [2] 64,704 64,498 64,288 64.070 Amortization $10,095 10,296 10,502 [4] 207 Bond Amortized Cost [1] 3,235,177 3,224,881 3,214,379 [5]

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 7C

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Diana Inc. issued $100,000 of its 9%, 5-year bonds for $96,149 when the market rate was 10%. The bonds pay interest semi-annually. Prepare an amortization table for the first three payments.
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.
Whirlie Inc. issued $300,000 face value, 10% paid annually, 10-year bonds for $319,251 when the market of interest was 9%. The company uses the effective-interest method of amortization. At the end of the year, the company will record ________. A. a credit to cash for $28,733 B. a debit to interest expense for $31,267 C. a debit to Discount on Bonds Payable for $1,267 D. a debit to Premium on Bonds Payable for $1.267
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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?