Southwest Corporation issued bonds with the following details: Face value: $700,000 Interest: 10 percent per year payable each December 31 Terms: Bonds dated January 1, 2018, due five years from that date The annual accounting period ends December 31. The bonds were issued at 103 on January 1, 2018, when the market interest rate was 9 percent. Assume the company uses straight-line amortization and adjusts for any rounding errors when recording interest expense in the final year. Required: 1. Compute the cash received from the bond issuance in dollars. TIP: The issue price typically is quoted at a percentage of face value. 2. & 3. Prepare the journal entry to record the issuance of the bonds and the payment of interest on December 31, 2018 and 2019. 4-a. How much interest expense would be reported on the income statements for 2018 and 2019? 4-b. Compute the bond value which should be reported on the balance sheets at December 31, 2018 and 2019.
Southwest Corporation issued bonds with the following details:
| Face value: $700,000 |
| Interest: 10 percent per year payable each December 31 |
| Terms: Bonds dated January 1, 2018, due five years from that date |
The annual accounting period ends December 31. The bonds were issued at 103 on January 1, 2018, when the market interest rate was 9 percent. Assume the company uses straight-line amortization and adjusts for any rounding errors when recording interest expense in the final year.
Required:
-
1. Compute the cash received from the bond issuance in dollars. TIP: The issue price typically is quoted at a percentage of face value.
-
2. & 3. Prepare the journal entry to record the issuance of the bonds and the payment of interest on December 31, 2018 and 2019.
-
4-a. How much interest expense would be reported on the income statements for 2018 and 2019?
-
4-b. Compute the bond value which should be reported on the balance sheets at December 31, 2018 and 2019.
Expert Answer
Related Accounting Q&A
Q: I understand the accounting equation is: Liabilities + Stock Holders’ Equity = Assets How do you pre...
A: The basic Accounting Equation is Assets = Equity + LiabilitiesAssets are the resources owned by the...
Q: Hello, Cowboy recording studio is considering the investment of $142,700 in a new recording equipmen...
A: Step 1:Calculation of the present value factor of annuity:Note: while calculating the present valu...
Q: Explain the meaning of the joint price-quantity variance.
A: Joint price-quantity variance: Variances are the difference between the actual results and the stand...
Q: There can be three subgroups within the long-term capital gain or loss group – 0%/15%/20%, 25%, and ...
A: Generally, capital gains are taxed at a rate of 15%. However a 0 % rate can also be applied when th...
Q: On December 31, 2016, Cullumber Company had 1,385,000 shares of $6 par common stock issued and outst...
A: Calculate the values related to preferred stock account that would appear on the stockholders\\\' eq...
Q: Cullumber Company markets CDs of numerous performing artists. At the beginning of March, Cullumber C...
A: Periodic Inventory System: Periodic Inventory System refers to the accounting system under which the...
Q: Depreciation calculation methods Gandolfi Construction Co. purchased a used CAT 336DL earth mover at...
A: The depreciation under straight line method is computed by following formula (cost-salvage value)/es...
Q: Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in ...
A: Break-even point: Break-even point of sales is that level of sales at which the firm is neither earn...
Q: I'm not sure how to come up with the missing numbers . Exercise 2-14 Complete each of the followin...
A: Contribution format income statementContribution format income statement highlights the cost behavio...
