Bonds Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond. Straight-line amortization bond Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment. Effective interest rate of amortization bond Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate. To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

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Answer 1

Question

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

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Exercise 10-7 (Algo) Straight-Line: Amortization table and bond interest expense LO P2 [The following information applies to the questions displayed below. Duval Company issues four-year bonds with a $110,000 par value on January 1, 2021, at a price of $105,895. The annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31, Exercise 10-7 (Algo) Part 1 1. Prepare a straight-line amortization table for these bonds Note: Round your answers to the nearest dollar amount. Semiannual Period-End 1/01/2021 6/30/2021 12/31/2021 6/30/2022 12/31/2022 6/30/2023 12/31/2023 6/30/2024 12/31/2024 Unamortized Discount Carrying Value

! Required information Problem 10-10AB (Algo) Effective Interest: Amortization of bond LO P5 [The following information applies to the questions displayed below.] Ike issues $90,000 of 11%, three-year bonds dated January 1, 2020, that pay interest semiannually on June 30 and December 31. They are issued at $92,283 when the market rate is 10%. Problem 10-10AB (Algo) Part 2 2. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. Total bond interest expense over life of bonds: Amount repaid: Total repaid payments of Par value at maturity Less amount borrowed 0 Total bond interest expense $ 0

Problem 14-3 (Algo) Straight-line and effective interest compared [LO14-2] On January 1, 2024, Reyes Recreational Products issued $200,000, 8%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $187,074 to yield an annual return of 10%. Required: 1. Prepare an amortization schedule that determines interest at the effective interest rate. 2. Prepare an amortization schedule by the straight-line method. 3. Prepare the journal entries to record interest expense on June 30, 2026, by each of the two approaches. 5. Assuming the market rate is still 10%, what price would a second investor pay the first investor on June 30, 2026, for $20,000 of the bonds? Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an amortization schedule that determines interest at the effective interest…

Answer 2

Question

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Expert Solution & Answer

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Answer 3

Question

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 5

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Answer 6

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

Answer 7

Chapter 14, Problem 14.3P

(1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The amortization schedule to determine the interest expenses at the effective interest rates.

Answer 8

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

Answer 9

(2)

To determine

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

Answer 10

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

Answer 11

(3)

To determine

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

Answer 12

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

Answer 13

(4)

To determine

To Explain: The pattern of interest differs between the two methods.

Answer 14

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Answer 15

(5)

To determine

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Answer 16

Expert Solution & Answer

Answer 17

Expert Solution & Answer

Answer 18

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Answer 19

Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - On January 1, 2018, Brandon Electronics issued 85...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8Q Ch. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q

Solution Summary: The author explains how to prepare the amortization schedule to determine the interest expenses at effective interest rates.

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

To Explain: The pattern of interest differs between the two methods.

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.

Want to see the full answer?

Chapter 14 Solutions

Solution Summary: The author explains how to prepare the amortization schedule to determine the interest expenses at effective interest rates.

To Prepare: The amortization schedule to determine the interest expenses at straight line method.

To Prepare: The journal entry to record interest expenses as on 30th June 2020 under two approaches.

To Explain: The pattern of interest differs between the two methods.

The price value of the bonds as on 30th June 2020 for $10,000 of the bonds.

Want to see the full answer?

Chapter 14 Solutions

To Prepare: The journal entry to record interest expenses as on 30^th June 2020 under two approaches.

The price value of the bonds as on 30^th June 2020 for $10,000 of the bonds.