Presented below is an amortization schedule related to Flounder Company's 5-year, $160,000 bond with a 7% interest rate and a 5%yield, purchased on December 31, 2023, for $173,855.Date12/31/2312/31/24 $11,20012/31/2512/31/2612/31/2712/31/28CashInterestReceived RevenueAmortized costFair value(a)(b)11,20011,20011,20011,200$8,69312/31/24$171,3488,5678,436170,8008,2988,151Bond PremiumAmortization$2,5072,633170,9002,7642,9023,049The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end.Carrying Amountof Bonds$173,855171,348168,715165,951163,049160,00012/31/25 12/31/26 12/31/27$168,715$165,951167,80012/31/28$163,049 $160,000164,100160,000Prepare the journal entry to record the purchase of these bonds on December 31, 2023, assuming the bonds are classified asheld-to-maturity securities.Prepare the journal entry related to the held-to-maturity bonds for 2024. Amortized costFair value(a)(b)(c)(d)(e)(f)No.(a)12/31/24 12/31/25(b)$171,348170,800$168,715Date170,90012/31/26 12/31/27 12/31/28$165,951 $163,049$160,000(List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. Ifno entry is required, select "No Entry" for the account titles and enter O for the amounts.)167,800Prepare the journal entry to record the purchase of these bonds on December 31, 2023, assuming the bonds are classified asheld-to-maturity securities.Prepare the journal entry related to the held-to-maturity bonds for 2024.Prepare the journal entry related to the held-to-maturity bonds for 2026.Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for-sale.Prepare the journal entries related to the available-for-sale bonds for 2024.Prepare the journal entries related to the available-for-sale bonds for 2026.O Search164,100Account Titles and Explanation160,000DOLLDebit3Credit

Presented below is an amortization schedule related to Flounder Company's 5-year, $160,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2023, for $173,855. Date 12/31/23 12/31/24 $11,200 12/31/25 12/31/26 12/31/27 12/31/28 Cash Interest Received Revenue Amortized cost Fair value (a) 11,200 11,200 11,200 11,200 $8,693 12/31/24 $171,348 8,567 170,800 8,436 8,298 8,151 Bond Premium Amortization $2,507 2,633 2,764 2,902 3,049 Carrying Amount of Bonds The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/25 12/31/26 $168,715 $165,951 170,900 167,800 $173,855 171,348 168,715 165,951 163,049 160,000 12/31/27 $163,049 164,100 12/31/28 $160,000 160,000 Prepare the journal entry to record the purchase of these bonds on December 31, 2023, assuming the bonds are classified as held-to-maturity securities.

Presented below is an amortization schedule related to Flounder Company's 5-year, $160,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2023, for $173,855. Date 12/31/23 12/31/24 $11,200 12/31/25 12/31/26 12/31/27 12/31/28 Cash Interest Received Revenue Amortized cost Fair value (a) 11,200 11,200 11,200 11,200 $8,693 12/31/24 $171,348 8,567 170,800 8,436 8,298 8,151 Bond Premium Amortization $2,507 2,633 2,764 2,902 3,049 Carrying Amount of Bonds The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/25 12/31/26 $168,715 $165,951 170,900 167,800 $173,855 171,348 168,715 165,951 163,049 160,000 12/31/27 $163,049 164,100 12/31/28 $160,000 160,000 Prepare the journal entry to record the purchase of these bonds on December 31, 2023, assuming the bonds are classified as held-to-maturity securities.

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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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?
Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.
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
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Irving Inc. sold bonds with a $50,000, 10% interest, and 10-year term at $52,000. What is the total amount of interest expense over the life of the bonds?
During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 loss
Held-to-Maturity Securities and Amortization of a Discount On January 1, 2019, Kelly Corporation acquired bonds with a face value of 500,000 for 483,841.79, a price that yields a 10% effective annual interest rate. The bonds carry a 9% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2022, and are being held to maturity Required: Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the: 1. straight-line method of amortization 2. effective interest method of amortization