Connect Access Card for Financial Accounting: Information and Decisions
8th Edition
ISBN: 9781259662966
Author: John J Wild
Publisher: McGraw-Hill Education
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BOND PRICING #2 for Borrowing Money Inc
Borrowing Money Inc (BMI) issues a bond on January 1, 2021 with a face valuc of $400,000.
The bond has an 7 year maturity date and requires SEMI ANNUAL interest paymerits. The bond's
stated interest rate is 3% and the current market interest rate is 2%.
Hint: remember to set your expectations
PV tables will be needed. Do not round your PVIF, but you may round answers to whole dollars.
Prepare the journal entry (in proper form) at issuance of this bond for BMI. Include your journal for
grading on your PDF upload.
Your multiple step calculations must also be shown
To get a preliminary idea of how you did you may enter your calculated amount for cash received at
Issuance
Revise your worksheet assumptions as indicated below and then answer the questions that folllow:
Face amount
Stated rate
Number of years
Market rate
Ⓒ Discount
O Premium
Required:
1. Was the bond issued at a discount or a premium?
Date
$3,050,000
2. Complete the first four rows of the amortization schedule. (Round your answers to 2 decimal places.)
June 30, 2021
December 31, 2021
June 30, 2022
December 31, 2022
8%
10
9%
Cash Paid
Interest Change in Carrying
Expense
Value
Carrying Value
From page 9-2 of the VLN, how do you determine the annuity cash flow (the bond interest payment) from an annual bond?
Group of answer choices
A. Bond payable x stated rate
B. Bond liability x stated rate
C. Bond payable x market rate
D. Bond liability x market rate
Chapter 10 Solutions
Connect Access Card for Financial Accounting: Information and Decisions
Ch. 10 - What is the main difference between notes payable...Ch. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 10DQ
Ch. 10 - Prob. 11DQCh. 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 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QSCh. 10 - Prob. 11QSCh. 10 - Bond features and terminology A2 Enter the letter...Ch. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 16QSCh. 10 - Jin Li, an employee of ETrain.com, leases a car at...Ch. 10 - Prob. 18QSCh. 10 - Prob. 19QSCh. 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. 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 - Straight-Line: Amortization of bond discount Pi P2...Ch. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 7PSBCh. 10 - Prob. 8PSBCh. 10 - Prob. 9PSBCh. 10 - Prob. 10PSBCh. 10 - Prob. 11PSBCh. 10 - Prob. 10SPCh. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Access the March 26, 2015, filing of the 10-K...Ch. 10 - Prob. 6BTNCh. 10 - Prob. 7BTNCh. 10 - Samsung(Samsung.com), Apple, and Google are...
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- The following amortization and interest schedule reflects the issuance of 10-year bonds by Wildhorse Corporation on January 1, 2019, and the subsequent interest payments and charges. The company's year-end is December 31, and financial statements are prepared once yearly. Year 1/1/2019 2020 2019 $12,500 $13,305 12,500 13,401 13,510 13,631 13,767 13,919 2021 2024 2025 2022 12,500 2023 12,500 12,500 12,500 12,500 14,280 12,500 14,493 14,731 2026 Amortization Schedule 2027 Cash Interest 2028 12,500 12,500 14,089 Amount Unamortized $14,126 13,321 12,420 11,410 10,279 9,012 7,593 6,004 4,224 2,231 Carrying Value $ 110,874 111,679 112,580 113,590 114,721 115,988 117,407 118,996 120,776 122,769 125,000 Click here to view factor tables. a. Indicate whether the bonds were issued at a premium or a discount.arrow_forwardReview the following three bonds payable assumptions: (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) More Info - X Jaid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $86.0000. 1. Seven-year bonds payable with face value of $86,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $86.000. 2. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $77,981. 3. Same bonds payable as in assumption 1,…arrow_forwardReview the following three bonds payable assumptions: 1 (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) O More Info semiannually. 1. Ten-year bonds payable with face value of $89,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. The present value of the bonds at issuance is $89,000. 2. Same bonds payable as in assumption 1, but the market interest rate is 16%. The present value of the bonds at issuance is $80,301. 3. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $99,226. Print Donearrow_forward
- Please help me figure out how to calculate discount on bond investment. Prepare the journal entries by Tanner-UNF to record interest on December 31, 2021, at the effective (market) rate.arrow_forwardReview the following three bonds payable assumptions: (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) x lid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $84,000. More Info 1. Seven-year bonds payable with face value of $84,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $84,000. 2. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $76,167. 3. Same bonds payable as in assumption 1, but…arrow_forwardb. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Receivable 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $23,854,460 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bondsarrow_forward
- North Co. Issued bonds on July 1, 2018 worth $100,000 with a coupon rate of 10% and an effective interest rate of 8%. Interest is paid annually, every July 1, and bonds mature after 5 years. Required: PV of Bonds: Calculation PV of Principal and PV of Interest and give your explanation about your calculation! Make issuance journal and please explain about the journal! Amortization: Calculation Bond Amortization Table and explain the result! Make Interest adjustment, amortization journal, and explain about the journal! Make Interest payment journal, amortization, and explain about the journal! Journalize Redemption at maturity and explain about the journal!arrow_forwardI'm trying to figure out what dates I need to use for my journal entries. I have already put July 1 and december 31 in my 2019 journal section and then june 30 for my 2020 section and it keeps telling me I'm wrong I don't get it. My numbers are right just not my dates. Effective Interest Premium Amortization Ex. 14.08 " Prepare the journal entries to record the issue of the bonds on July 1, 2019, and the interest payments on December 31, 2019, and June 30, 2020." Polk Incorporated issued $200,000 of 13% bonds on July 1, 2019, for $206,801.60. The bonds were dated January 1, 2019, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 12%. Polk uses the effective interest method of amortization. Required: Prepare the journal entries to record the issue of the bonds on July 1, 2019, and the interest payments on December 31, 2019, and June 30, 2020. In addition, prepare a bond interest expense and premium amortization schedule for the bonds…arrow_forwardplease solve step by step if using BA caluculater please explain what values use for what. if using excel show the formula A broker receives an order for three bonds: (a) 7% bond (pays interest on March and September 15) maturing on September 15, 2030; (b) 5.5% bond (pays interest on May and November 1) maturing on May 1, 2035; and (c) 10% bond (pays interest on January and July 8) maturing on July 8, 2025. All three bonds pay semi-annual interest and the current market interest rate is 9% (for all three). What prices would the broker quote for each of the three bonds if the sale is settled on May 4, 2022? (a) Show your work. (b) (c) How much accrued interest would the buyer need to pay on each of the bond? Show your work. How much would the buyer actually pay for each of the bond? Show your work.arrow_forward
- 1. How much is the amortization of discount for 2021? 2. How much is the carrying value of the bonds payable as of December 31, 2021?arrow_forwardAssume that a bond is issued with the following characteristics: Date of bonds: January 1, 2023; maturity date: Dec. 31, 2027; face value: $200,000; Coupon interest rate: 10 percent paid semiannually; market interest rate: 12 percent; issue price: $185,280; bond discount is amortized using the effective interest method of amortization. What is the amount of bond discount amortization for the June 30, 2023, adjusting entry? A) $559 B) $1,117 C) $10,000 D) $11,117arrow_forwardEnumerate the following; 32. Provides for recognition of an equal amount of premium or discount amortization each period. 33. Bonds that mature in one lump sum at a specified future date. 34. Bonds that provide for conversion into some other security at the option of the stockholder. 35. Bonds that mature in a series of installments at future dates. 36. The difference between the face value and the sales price when bonds are sold below their face value. 37. Bonds for which assets are pledged to guarantee repayment. 38. Obligations that are not expected to be paid in cash within one year or the normal operating cycle. 39. Bonds that do not bear interest but instead are sold at significant discounts providing the investor with a total interest payoff at maturity. 40. Costs incurred by the issuer for legal services, printing and engraving, taxes, and underwriting in connection with the sale of a…arrow_forward
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