INTERMEDIATE ACCOUNTING RMU 9TH EDITION
9th Edition
ISBN: 9781260998726
Author: SPICELAND
Publisher: MCG
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Textbook Question
Chapter 14, Problem 14.7BE
Straight-line interest on bonds
• LO14–2
On January 1, a company issued 3%, 20-year bonds with a face amount of $80 million for $69,033,776 to yield 4%. Interest is paid semiannually. What was the straight-line interest expense on the December 31 annual income statement?
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Students have asked these similar questions
Question 9
Vadercat Limited issued $15 million 4.0 percent, 8 year bonds on
September 1, 2023. The market rate of interest on the date of the
issue was 4.5 percent. Interest is payable semi-annually on March 1
and September 1. The company's year-end is December 31.
Required:
a. Prepare all journal entries required to record the bonds in the
company's financial records for the first full year the bonds are
outstanding. The company uses the straight-line method of
amortizations.
b. Indicate how the bond obligation would be shown on the
company's year-end statement of financial position.
c. How much interest expense, related to this security, is shown
on the 2023 year end income statement?
d. How much interest expense, related to this security, will be
shown on the 2024 year end income statement?
Required information
Exercise 9-11B Record bonds issued at a discount and related semiannual interest (LO9-6)
[The following information applies to the questions displayed below]
On January 1, Year 1, a company issues $500,000 of 6% bonds, due in 20 years, with interest payable semiannually on
June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 7%, the bonds will issue at $446,611.
Exercise 9-11B Part 2
2. Record the bond issue on January 1, Year 1, and the first two semiannual interest payments on June 30, Year 1, and December 31,
Year 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round
your final answers to the nearest whole dollar.)
View transaction list
Journal entry worksheet
1
2
3
Record the bond issue.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
January 01
Cash
446,611
Discount on Bonds Payable
Bonds Payable
Record entry
Clear entry
View…
Exercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and
Retirement (LO10-5, LO10-6)
Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September
30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the
following journal entries.
a. April 1, 2021, to record the issuance of the bonds.
b. September 30, 2021, to pay interest and to amortize the bond premium.
c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume
an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31.
d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities.
(ignore possible income tax effects.)
(If no entry is required for a transaction/event,…
Chapter 14 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
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. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q
Ch. 14 - When a notes stated rate of interest is...Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note issued for cash; borrower and lender LO143...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Reporting bonds at fair value LO146 AI Tool and...Ch. 14 - Bond valuation LO142 Your investment department...Ch. 14 - Determine the price of bonds in various situations...Ch. 14 - Determine the price of bonds; issuance; effective...Ch. 14 - Investor; effective interest LO142 (Note: This is...Ch. 14 - Bonds; issuance; effective interest; financial...Ch. 14 - Bonds; issuance; effective interest LO142 The...Ch. 14 - Prob. 14.7ECh. 14 - Investor; straight-line method LO142 (Note: This...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Bonds; effective interest; adjusting entry LO142...Ch. 14 - Prob. 14.12ECh. 14 - Issuance of bonds; effective interest LO142...Ch. 14 - Prob. 14.14ECh. 14 - Error correction; accrued interest on bonds LO142...Ch. 14 - Error in amortization schedule LO143 Wilkins Food...Ch. 14 - Prob. 14.17ECh. 14 - Note with unrealistic interest rate; lender;...Ch. 14 - Prob. 14.19ECh. 14 - Prob. 14.20ECh. 14 - Installment note LO143 LCD Industries purchased a...Ch. 14 - Prob. 14.22ECh. 14 - Early extinguishment LO145 The balance sheet of...Ch. 14 - Convertible bonds LO145 On January 1, 2018, Gless...Ch. 14 - Prob. 14.25ECh. 14 - Convertible bonds; induced conversion LO145 On...Ch. 14 - Prob. 14.27ECh. 14 - Bonds with detachable warrants LO145 On August 1,...Ch. 14 - Reporting bonds at fair value LO146 (Note: This...Ch. 14 - Reporting bonds at fair value LO146 On January 1,...Ch. 14 - Reporting bonds at fair value; calculate fair...Ch. 14 - Prob. 14.32ECh. 14 - Troubled debt restructuring; debt settled ...Ch. 14 - Prob. 14.34ECh. 14 - Troubled debt restructuring; modification of...Ch. 14 - Prob. 14.36ECh. 14 - Determining the price of bonds; discount and...Ch. 14 - Effective interest; financial statement effects ...Ch. 14 - Prob. 14.3PCh. 14 - Bond amortization schedule LO142 On January 1,...Ch. 14 - Issuer and investor; effective interest;...Ch. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Bonds; effective interest; partial period...Ch. 14 - Zero-co upon bonds LO142 On January 1, 2018,...Ch. 14 - Prob. 14.10PCh. 14 - Prob. 14.11PCh. 14 - Prob. 14.12PCh. 14 - Note and installment note with unrealistic...Ch. 14 - Prob. 14.14PCh. 14 - Early extinguishment; effective interest LO145...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Early extinguishment LO145 The long-term...Ch. 14 - Convertible bonds; induced conversion; bonds with...Ch. 14 - Convertible bonds; zero coupon; potentially...Ch. 14 - Prob. 14.21PCh. 14 - Determine bond price; record interest; report...Ch. 14 - Report bonds at fair value; quarterly reporting ...Ch. 14 - Prob. 14.24PCh. 14 - Prob. 14.25PCh. 14 - Troubled debt restructuring Appendix B At January...Ch. 14 - Prob. 14.1BYPCh. 14 - Real World Case 142 Zero-coupon debt; HP Inc. ...Ch. 14 - Prob. 14.4BYPCh. 14 - Prob. 14.5BYPCh. 14 - Prob. 14.6BYPCh. 14 - Prob. 14.8BYPCh. 14 - Prob. 14.9BYPCh. 14 - Research Case 1410 FASB codification research;...Ch. 14 - Prob. 14.11BYP
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