9th Edition

ISBN: 9781260180657

Author: SPICELAND

Publisher: MCG

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A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as th…

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

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Textbook Question

Chapter 14, Problem 14.4P

Bond amortization schedule

• LO14–2

On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:

Chapter 14, Problem 14.4P, Bond amortization schedule LO142 On January 1, 2018, Tennessee Harvester Corporation issued

Required:

1. What is the face amount of the bonds?
2. What is the initial selling price of the bonds?
3. What is the term to maturity in years?
4. Interest is determined by what approach?
5. What is the stated annual interest rate?
6. What is the effective annual interest rate?
7. What is the total cash interest paid over the term to maturity?
8. What is the total effective interest expense recorded over the term to maturity?

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Chapter 14, Problem 14.3P

Chapter 14, Problem 14.5P

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Question 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 ctrt

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of 6 4:21:47 ook rint Required information [The following information applies to the questions displayed below.] Temptation Vacations issues $49 million in bonds on January 1, 2024, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) Date 1/1/2024 6/30/2024 12/31/2024 (2) Cash Paid for Interest $1,470,000 1,470,000 Market annual interest rate (3) Interest Expense $1,378,755 1,376,473 (4) Decrease in % Carrying Value $91,245 93,527 (5) Carrying Value $55,150, 180 5. What is the market annual interest rate? (Round your answer to the nearest whole percent.) 55,058,935 54,965,408 4

Chapter 14 Solutions

INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS

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Solution Summary: The author explains that bonds are a kind of interest bearing notes payable, usually issued by companies, universities, and governmental organizations.

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Chapter 14 Solutions