Problem 6-6 (A Dumaguete Company issued bonds with face amount of P6,000,000 on January 1, 2020. The nominal rate of 6% is payable annually on December 31. The bonds are issued with an 8% effective yield. The bonds mature on every December 31 each year at the rate of P2,000,000 for three years. Present value of 1 at 8% One period Two periods Three periods 0.9259 0.8573 0.7938 Required: 1. Determine the market price or issue price of the bonds. 2. Prepare journal entries for 2020. The effective interest method of amortization is used. 3. Determine the carrying amount of the bonds payable on December 31, 2020.

Problem 6-6 (A Dumaguete Company issued bonds with face amount of P6,000,000 on January 1, 2020. The nominal rate of 6% is payable annually on December 31. The bonds are issued with an 8% effective yield. The bonds mature on every December 31 each year at the rate of P2,000,000 for three years. Present value of 1 at 8% One period Two periods Three periods 0.9259 0.8573 0.7938 Required: 1. Determine the market price or issue price of the bonds. 2. Prepare journal entries for 2020. The effective interest method of amortization is used. 3. Determine the carrying amount of the bonds payable on December 31, 2020.

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter11: Liabilities: Bonds Payable

Section: Chapter Questions

Problem 11.1BE: Issuing bonds at face amount On January 1, the first day of the fiscal year, Designer Fabric Inc....

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Cornerstone Exercise (Appendix 9A) Bond Issue Price On January 1, 2021, Callahan Auto issued $900,000 of 9%, 10-year bonds. Interest is payable semiannually on June 30 and December 31. Required: What is the issue price if the bonds are sold to yield 8%? (Note: Round to the nearest dollar.)
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.
On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000 are to be made annually. If the company received proceeds of $112,300, how would the bonds issuance be quoted? A. 1.123 B. 112.30 C. 0.890 D. 89.05
Brief Exercise (Appendix 9A) Bond Issue Price On January 1, 2020, Ruby Inc. issued 3,000 $1,000 par value bonds with a staled rate of6% and a 10-year maturity. Interest is payable semiannually on June 30 and December 31. Required: What is the issue price if the bonds are sold to yield 8%? {Note: Round to nearest dollar.)
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