Concept explainers
Reporting bonds at fair value
• LO14–6
On January 1, 2018, Rapid Airlines issued $200 million of its 8% bonds for $184 million. The
Required:
1. Prepare the
2. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).
3. 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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Chapter 14 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortizationarrow_forwardExercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on January 1, 2020. Interest is paid annually on December 31. The principal and the final interest payment are due on December 31, 2021. Required: Prepare the entry to recognize the issuance of the bonds. Prepare the journal entry for December 31, 2020. Prepare the journal entry to record repayment of the principal on December 31, 2021. CONCEPTUAL CONNECTIONHow would the interest expense for 2020 change if the bonds had been issued at a premium?arrow_forward24.1 On July 1, 2022, NC called for redemption of all of its P2,000,000 faces amounts bonds payable outstanding at the call price of 102. As of June 30, 2022, the unamortized discount was P90,000, and the unamortized bond issue costs were P45,800. The market value of the bonds was P2,020,300 on July 1, 2022. NC’s effective income tax rate was 30% for 2022. In its income statement for the year ended December 31, 2022, what amount should NC report as loss from bond redemption?arrow_forward
- p19arrow_forwardQuestion 25 On June 1, 2020, Mitchell Inc. issued 100, 8%, $1,000 bonds dated June 1, 2020 for $108,530. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 6%. The bonds mature May 31, 2025, and the compar uses the effective interest method to amortize bond discounts or premiums. The partial amortization schedule is as follows: Amortization schedule Cash Effective Premium Outstanding Interest Interest amortization Balance 0 06/01/20 $108.530 1 11/30/20 $4.000 $3.256 ($744) 107,786 2 05/31/21 4,000 3,234 (766) 107,020 Required: Prepare journal entries on the following dates. Round to the nearest dollar. 1. June 1, 2020, bond issuance. 2. November 30, 2020, interest payment. 3. December 31, 2020, adjusting entry. Note: You may create a table as follows to organize your journal entries. Date Account titles Debit Credit 1 Cash 10,000 Sales Revenue 10,000 Edt Format Table 12pt v Paragraoh v B I U 24 6. W R. T F G K L 2N M AV alt ctrtarrow_forward37 Cullumber Electric sold $7,680,000, 10%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and paid interest annually on January 1. The bonds were sold at 98. a Prepare the journal entry to record the issuance of the bonds on January 1, 2022. 100A b At December 31, 2022, $15,360 of the Discount on Bonds Payable account has been amortized. Show the balance sheet presentation of the long-term liability at December 31, 2022. wor2 Tawo above Common c On January 1, 2024, when the carrying value of the bonds was $7,557,120, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been paid. Stock, Common hadw a holt yd (beaU) bably Tawoft deco 350 38 On January 1, Stunt Corp. had outstanding convertible bonds with a face value of $1,000,000 and an unamortized discount of $100,000. On that date, the bonds were converted into 100,000 shares of $1 par stock. The market value on the date of conversion was…arrow_forward
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