Concept explainers
Determine
• LO14–6
On January 1, 2018, NFB Visual Aids issued $800,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $668,000 as determined by their market value in the over-the-counter market.
Required:
1. Determine the price of the bonds at January 1, 2018, and prepare the
2. Prepare the journal entry to record interest on June 30, 2018 (the first interest payment).
3. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).
4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet.
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Intermediate Accounting
- Q#9 On June 30, 2021, Singleton Computers issued 5% stated rate bonds with a face amount of $280 million. The bonds mature on June 30, 2036 (15 years). The market rate of interest for similar bond issues was 4% (2.0% semiannual rate). Interest is paid semiannually (2.5%) on June 30 and December 31, beginning on December 31, 2021. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:1. Determine the price of the bonds on June 30, 2021.2. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method. 1. Table values are based on: n = i = Cash Flow Amount Present Value Interest Principal Price of bondsarrow_forwardPB6. LO 13.3Edward Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable semiannually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. July 1, 2018: entry to record issuing the bonds Dec. 31, 2018: entry to record payment of interest to bondholders Dec. 31, 2018: entry to record amortization of discountarrow_forwardBE14.6 (LO 1) On January 1, 2020, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. JWS uses the effective-interest method. Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%. BE14.7 (LO 1) Assume the bonds in BE14.6 were issued for $644,636 and the effective-interest rate is 6%. Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.arrow_forward
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