Financial Accounting-w/cd-package
3rd Edition
ISBN: 9780131060876
Author: REIMERS
Publisher: PEARSON
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Chapter 7A, Problem 5PA
1.
To determine
Calculate the proceeds for the bond issue and the manner it would issuing the bonds affect the financial statements for A’s Imports.
2.
To determine
Prepare an amortization schedule for the first three years of the life of the bonds.
3.
To determine
Identify the amount of interest expenses related to issued bonds that A’s Imports would be reported on its income statement for the year ended December 31, 2010.
4.
To determine
Calculate the interest expense using the
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On January 1, 2020 Omsk Corporation issued
Bonds pay interest each July 1 and January 1.
150,000 of 5 % bonds, due in
17 years
12 % market rate of interest.
Assume
Requirements (Round to 0 decimals, Rounding errors do not matter):
1. Compute market price of bonds. Provide detailed computation. Use functions in Excel
2. What is an amount of discount /premium? Indicate, what it is (discount or premium). Computation.
3. Prepare amortization schedule for first 5 years. Use formulas in Excel.
4. Prepare journal entry to record bond issue.
5. Prepare journal entry on July 1, 2020.
6. Prepare journal entry on December 31, 2020.
7. Prepare journal entry on January 1, 2021
On January 1, 2024, Agricultural Credit Union (ACU) issued 6%, 20-year bonds payable with face value of $700,000. The bonds pay interest on June 30 and December 31.
Read the requirements.
Requirement 1. If the market interest rate is 5% when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain.
▼. They are
in this market, so investors will pay
The 6% bonds issued when the market interest rate is 5% will be priced at
acquire them.
Requirements
C
1.
If the market interest rate is 5% when ACU issues its bonds, will the bonds be priced at
face value, at a premium, or at a discount? Explain.
2.
If the market interest rate is 7% when ACU issues its bonds, will the bonds be priced at
face value, at a premium, or at a discount? Explain.
3.
The issue price of the bonds is 99. Journalize the following bond transactions:
a. Issuance of the bonds on January 1, 2024.
b.
c.
d.
Payment of interest and amortization on June 30, 2024.
Payment of interest…
The notes to the Thorson Ltd.financial statements reported the following data on December 31, Year 1 (end of the fiscal year):
Thorson amortizes bond discounts using the effective-interest method and pays all interestamounts at December 31.
Requirements1. Assume the market interest rate is 6% on January 1 of year 1, the date the bonds are issued.a. Using the PV function in Excel, what is the issue price of the bonds?b. What is the maturity value of the bonds?c. What is Thorson’s annual cash interest payment on the bonds?d. What is the carrying amount of the bonds at December 31, year 1?2. Prepare an amortization table through the maturity date for the bonds using Excel. (Roundall amounts to the nearest dollar.) How much is Thorson’s interest expense on the bonds forthe year ended December 31, Year 4?3. Show how Thorson would report these bonds and notes at December 31, Year 4.
Chapter 7A Solutions
Financial Accounting-w/cd-package
Ch. 7A - Prob. 1YTCh. 7A - Suppose Action Company issues a 1,000, 10-year,...Ch. 7A - Suppose HPS Company issues a 1,000 face value,...Ch. 7A - Present value. (LO 8). Suppose you want to have...Ch. 7A - Present value. (LO 8). Able Company has offered to...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Prob. 5PACh. 7A - Prob. 6PB
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