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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Issuing bonds
Cyber Tech Inc. produces and distributes fiber optic cable for use by telecommunications companies. Cyber Tech Inc. Issued $50,000,000 of 20-year, 6% bonds on March 1 at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Illustrate the effects on the accounts and financial statements of recording the following selected transactions for the current year:
Mar. 1. Issued the bonds for cash at their face amount.
Sept. 1. Paid the interest on the bonds.
Dec. 31. Recorded accrued interest for four months.

To determine

Concept Introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date. Bonds may be issued at a premium or discount.

To Indicate:

The effect of the bond transactions on the accounts and financial statements

Explanation

The effect of the bond transactions on the accounts and financial statements is explained as follows:

    Date Account Account TypeFinancial Statement Amount Increase or Decrease
    Mar. 1Cash AssetBalance sheet $ 50,000,000 Increase
    Bonds PayableLiabilityBalance sheet $ 50,000,000 Increase
    Sept...

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