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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.
To Explain: What is being described by the announcement?
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The psychological reason for the securities to be priced.
(3)
To Identify: The accounting considerations for Incorporation CF and how Incorporation CF sales are recorded, and describe the Incorporation CF records the sale.
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INTERMEDIATE ACCT VOL.2>CUSTOM<
- Exercise 14-23 (Algo) Early extinguishment [LO14-5] The balance sheet of River Electronics Corporation as of December 31, 2023, included 12.50% bonds having a face amount of $91.8 million. The bonds had been issued in 2016 and had a remaining discount of $4.8 million at December 31, 2023. On January 1, 2024, River Electronics called the bonds before their scheduled maturity at the call price of 105. Required: Prepare the journal entry by River Electronics to record the redemption of the bonds at January 1, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.arrow_forwardQ#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_forwardOnly typed answer A 9.50% coupon Hess Corp bond yields 1.47% and matures on April 21, 2023. A trade settles on July 22, 2018. Coupon interest is paid April 21 and October 21 of each year. What is the interest that the buyer must pay to the seller in addition to the offer price? Round to 2 decimal places. 23.33 is not the answerarrow_forward
- A 9.50% coupon Hess Corp bond yields 1.47% and matures on April 21, 2023. A trade settles on July 22, 2018. Coupon interest is paid April 21 and October 21 of each year. What is the interest that the buyer must pay to the seller in addition to the offer price? Round to 2 decimal places. 23.33 is not the answerarrow_forwardQ 34 Question 34 On January 1, 20x8, James Corporation issued $500,000, 10%, 5-year bonds, at 98. The bonds pay semiannual interest on January 1 and July 1. The company uses the straight-line method of amortization and has a calendar year end. The journal entry on January 1, 20x8 would include which of the following? Select one: a. Debit to cash for $500,000 b. Debit to cash for $490,000 c. Credit to Discount on Bonds Payable for $10,000 d. Credit to Bonds Payable for $490,000arrow_forwardCurrent position analysis The bond indenture for the 10-year, 9% debenture bonds issued January 2, 20Y5, required working capital of 100,000, a current ratio of 1.5, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 20Y6, the three measures were computed as follows: 1. Current assets: Cash...................................... 102,000 Temporary investments.................... 48,000 Accounts and notes receivable (net)......... 120,000 Inventories................................ 36,000 Prepaid expenses.......................... 24,000 Intangible assets.......................... 124,800 Property, plant, and equipment............. 55,200 Total current assets (net)................ 510,000 Current liabilities: Accounts and short-term notes payable..... 96,000 Accrued liabilities.......................... 204,000 Total current liabilities.................. 300,000 Working capital............................. 210,000 2. Current ratio................................ 1.7 510,000 300,000 3. Quick ratio.............................................. 1.2 115,200 96,000 a. List the errors in the determination of the three measures of current position analysis. b. Is the company satisfying the terms of the bond indenture? Explain.arrow_forward
- Kk.371. Bonds Issued at a Discount (Effective Interest) Sicily Corporation issued $1,250,000 in 7% bonds (payable on December 31, 2032) on December 31, 2022, for $1,125,000. Interest is paid on June 30 and December 31. The market rate of interest is 9%. Required: Prepare the amortization table through December 31, 2024, using the effective interest rate method. If required, round your answers to the nearest dollar.arrow_forwardLO 13.1 On October 1 a company sells a 3-year, $2,500,000 bond with an 8% stated interest rate. Interest is paid quarterly and the bond is sold at 89.35. On October 1 the company would collect ________. $200,000 $558,438 $2,233,750 $6,701,250arrow_forwardQw. 27. On January 1, 2022, Pipestone Corporation issued a four-year, $40,000, 7% bond. The interest is payable annually each December 31. The issue price was $38,672 based on an 8% effective interest rate. Pipestone uses the effective-interest amortization method. The 2023 interest expense is closest to .arrow_forward
- Q 28 Question 28 Rector Company s trial balance at December 31 reports Bonds Payable of $100,000 and Discount on Bonds Payable of $4,500. What is the carrying value of the bonds issue reported on the balance sheet at the end of the year? Select one: a. $ 95,500. b. $104,500. c. $ 4,500. d. $100,000.arrow_forward9) Exercise A-5 (Static) Derivatives; interest rate swap; fixed rate debt; extended method [LOA–6] On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $200,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% at June 30, 2021. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: January 1 March 31…arrow_forwardP6–23 Bond valuation and yield to maturity Mark Goldsmith’s broker has shown him two bonds issued by different companies. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 7.5%. The first bond is issued by Crabbe Waste Disposal Corporation and has a coupon rate of 6.324% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon rate of 8.8% paid annually. D. Assume that Mark will reinvest all the interest he receives as it is paid, and his rate of return on reinvested interest will be 10%. Calculate the total dollars that Mark will accumulate over 5 years if he invests in Crabbe bonds or Malfoy bonds. Your total dollar calculation will include the interest Mark gets, the principal he receives when the bonds mature, and all the additional interest he earns from reinvesting the coupon payments that he receives. E. The bonds issued by Crabbe and Malfoy might appear to be equally good investments because they offer the same yield to…arrow_forward
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