Bond discount, entries for bonds payable transactions On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $42,309,236. Interest on the builds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry’ to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. (Appendix 1) Compute the price of $42,309,256 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)

BuyFind

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
BuyFind

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

Solutions

Chapter
Section
Chapter 11, Problem 11.1BPR
Textbook Problem

Bond discount, entries for bonds payable transactions

On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $42,309,236. Interest on the builds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Instructions

1. Journalize the entry’ to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.

2. Journalize the entries to record the following:

A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)

B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)

3. Determine the total interest expense for Year 1.

4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?

5. (Appendix 1) Compute the price of $42,309,256 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)

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Chapter 11 Solutions

Corporate Financial Accounting
Ch. 11 - Issuing bonds at a discount On the first day of...Ch. 11 - Discount amortization Using the bond from Basic...Ch. 11 - Issuing bonds at a premium On the first day of the...Ch. 11 - Premium amortization Using the bond from Basic...Ch. 11 - Redemption of bonds payable A 500,000 bond issue...Ch. 11 - Bond price United States Steel Corporations 7.5%...Ch. 11 - Entries for issuing bonds Thomson Co. produces and...Ch. 11 - Entries for issuing bonds and amortizing discount...Ch. 11 - Entries for issuing bonds and amortizing premium...Ch. 11 - Entries for issuing and calling bonds; loss Hoover...Ch. 11 - Entries for issuing and calling bonds; gain Mia...Ch. 11 - Reporting bonds At the beginning of the current...Ch. 11 - Present value of amounts due Assume that you are...Ch. 11 - Present value of an annuity Determine the present...Ch. 11 - Present value of an annuity On January 1 you win...Ch. 11 - Present value of an annuity Assume the same data...Ch. 11 - Present value of bonds payable; discount Pinder...Ch. 11 - Present value of bonds payable; premium Moss Co....Ch. 11 - Amortize discount by interest method On the first...Ch. 11 - Amortize premium by interest method Shunda...Ch. 11 - Compute bond proceeds, amortizing premium by...Ch. 11 - Compute bond proceeds, amortizing discount by...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Continuing Company AnalysisAmazon: Times interest...Ch. 11 - Arch Coal:Times interest earned Arch Coal, Inc. is...Ch. 11 - Aeropostale: Times interest earned Aeropostale,...Ch. 11 - Hilton and Marriott: Times interest earned Hilton...Ch. 11 - Ethics in Action CLG Capital Inc. is a large...Ch. 11 - Communication Nordbock Inc. reports the following...

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