Problem 2 Bond Amortization (Premium) On January 1, 2022, Skyfall Inc. received permission to issue a 5-year bond with a face value of P6,000,000 The nominal rate is 12% and is payable annually every December 31. The face value of the bond will be repaic in full after 5 years. On January 1, 2022, Skyfall Inc. sold the bonds for P6,454,894.41with an effective yield of 10%. Using the effective interest method, complete the amortization table. Interest Payments Interest Expense Carrying Value Date January 1, 2022 December 31, 2022 December 31, 2023 Amortization

Problem 2 Bond Amortization (Premium) On January 1, 2022, Skyfall Inc. received permission to issue a 5-year bond with a face value of P6,000,000 The nominal rate is 12% and is payable annually every December 31. The face value of the bond will be repaic in full after 5 years. On January 1, 2022, Skyfall Inc. sold the bonds for P6,454,894.41with an effective yield of 10%. Using the effective interest method, complete the amortization table. Interest Payments Interest Expense Carrying Value Date January 1, 2022 December 31, 2022 December 31, 2023 Amortization

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 96PSB

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Exercise Interest Payments and Interest Expense for Bonds (Straight Line) On January 1, 2020, Perry Manufacturing issued bonds with a total face amount of $3,000,000 and a stated rate of 9%. Required: Calculate the interest expense for 2020 if the bonds were sold at par. Calculate the interest expense for 2020 if the bonds were sold at a premium and the straight- line premium amortization for 2020 is $12,000. 3. Calculate the interest expense for 2020 if the bonds were sold at a discount and the straight- line discount amortization for 2020 is $33,000.
Exercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on January 1, 2020. Interest is paid annually on December 31. The principal and the final interest payment are due on December 31, 2021. Required: Prepare the entry to recognize the issuance of the bonds. Prepare the journal entry for December 31, 2020. Prepare the journal entry to record repayment of the principal on December 31, 2021. CONCEPTUAL CONNECTIONHow would the interest expense for 2020 change if the bonds had been issued at a premium?
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.
Exercise Issuance and Interest Amortization for Zero Coupon Note (Straight Line) Kerwin Company borrowed $10,000 on a 2-year, zero coupon note. The note was issued on January 1, 2020. The face amount of the note, $12,544, is to be paid at maturity on December 31, 2021. Required: Assuming straight line amortization, calculate the interest expense for 2020 and 2021. Prepare the entries to recognize the borrowing, the first years interest expense, and the second years interest expense plus redemption of the note at maturity.