Financial & Managerial Accounting: Information for Decisions w Access Card, 5th edition, ACC 211 & 212, Northern Virginia Community College
Financial & Managerial Accounting: Information for Decisions w Access Card, 5th edition, ACC 211 & 212, Northern Virginia Community College
5th Edition
ISBN: 9781259347641
Author: Ken W. Shaw, Barbara Chiappetta John J. Wild
Publisher: McGraw Hill Education
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Chapter 10, Problem 1PSA

1.

To determine

Bonds issue price.

1.

Expert Solution
Check Mark

Explanation of Solution

(a)

Cash flow

Table

Value from table

Amount

($)

Present value

($)

Par value

B.1

0.4564

40,000

18,256

Annuity (Interest)

B.2

13.5903

2,000

27,181

Bond’s issue price

45,437

Premium on bond

5,437

Table (1)

Working notes:

Given,
Bonds par value is $40,000.
Rate of interest is 10%.
Time period is 0.05.

Computation of interest on bond,

Interest on bond=Bondvalue×Rateofintrest×Timeperiod =$40,000×10%×0.05 =$2,000

Hence, interest on bond is $2,000.

(b)

Issue of bonds at premium on January 1, 2017

Date

Account Title and Explanation

Post.

Ref.

Debit

($)

Credit

($)

January 1

Cash

45,437

Premium on bonds payable

5,437

Bonds payable

40,000

(To record the sold bonds at pre)

Table (2)

  • Cash account is the assets account. Since the cash is received, the value of assets is increased. So, debit the credit the cash account.
  • Premium on bonds payable account is the liabilities account. Here, at the time of issue of the bonds premium has been given which increases the liabilities of the company. So, debit the premium on bonds payable account.
  • Bonds payable account is the liabilities account. Bonds has been sold, which increases the liabilities of the company. So, credit the bonds payable account.

2.

To determine

Bonds issue price.

2.

Expert Solution
Check Mark

Explanation of Solution

(a)

Cash flow

Table

Value from table

Amount

($)

Present value

($)

Par value

B.1

0.3769

40,000

15,076

Annuity (Interest)

B.3

12.4622

2,000

24,924

Bond’s issue price

40,000

Table (3)

Hence, bonds issue price is $40,000.

(b)

Sale of bonds at par on January 1, 2017

Date

Account Title and Explanation

Post.

Ref.

Debit

($)

Credit

($)

January 1

2017

Cash

40,000

Bonds payable

40,000

(To record the sold bonds at par)

Table (4)

  • Cash account is the assets account. Since the cash is received, the value of assets is increased. So, debit the credit the cash account.
  • Bonds payable account is the liabilities account. Bonds has been sold, which increases the liabilities of the company. So, credit the bonds payable account.

3.

To determine

Bonds issue price

3.

Expert Solution
Check Mark

Explanation of Solution

(a)

Cash flow

Table

Value from table

Amount

($)

Present value ($)

Par value

B.1

0.3118

40,000

12,472

Annuity (Interest)

B.2

11.4699

2,000

22,940

Bond’s issue price

35,412

Discount on bond

4,588

Table (5)

Hence, bonds issue price is $35,412.

(b)

Issue of bonds at discount on January 1, 2017

Date

Account Title and Explanation

Post.

Ref.

Debit

($)

Credit

($)

January 1

Cash

35,412

Discount on bonds payable

4,588

Bonds payable

40,000

(To record the sold bonds at discount)

Table (6)

  • Cash account is the assets account. Since the cash is received, the value of assets is increased. So, debit the credit the cash account.
  • Discount on bonds payable account is the liabilities account. Here, at the time of issue of the bonds discount has been given which decrease the liabilities of the company. So, debit the discount on bonds payable account.
  • Bonds payable account is the liabilities account. Bonds has been sold, which increases the liabilities of the company. So, credit the bonds payable account.

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Chapter 10 Solutions

Financial & Managerial Accounting: Information for Decisions w Access Card, 5th edition, ACC 211 & 212, Northern Virginia Community College

Ch. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 10DQCh. 10 - What is the issue price of a $2,000 bond sold at...Ch. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Prob. 16DQCh. 10 - Prob. 17DQCh. 10 - Prob. 18DQCh. 10 - Prob. 19DQCh. 10 - Prob. 20DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Recording bond issuance and discount amortization...Ch. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 16QSCh. 10 - Prob. 17QSCh. 10 - Prob. 18QSCh. 10 - Prob. 19QSCh. 10 - Prob. 20QSCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Prob. 1PSACh. 10 - Prob. 2PSACh. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Prob. 6PSACh. 10 - Prob. 7PSACh. 10 - Prob. 8PSACh. 10 - Prob. 9PSACh. 10 - Prob. 10PSACh. 10 - Prob. 11PSACh. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 7PSBCh. 10 - Prob. 8PSBCh. 10 - Prob. 9PSBCh. 10 - Problem 10-10BB Effective Interest: Amortization...Ch. 10 - Prob. 11PSBCh. 10 - Prob. 10SPCh. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Prob. 5BTNCh. 10 - Prob. 6BTNCh. 10 - Prob. 7BTNCh. 10 - Prob. 8BTNCh. 10 - Prob. 9BTN
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