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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Brief ExerciseReporting Long-Term Debt on the Balance Sheet

Scott Corp. provides contracted home staging services to real estate agencies and their clients. Scott issued the following bonds in the current year:

  1. 1,500 bonds with $1,000 face value which the market has valued at $45,000 below its face value
  2. 2,700 bonds with $1,000 face value which the market has valued at $85,000 above its face value

Required:

Prepare the balance sheet presentation for these two bonds.

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.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

To indicate:

The Balance Sheet presentation of two bonds.

Explanation

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.

The Balance Sheet presentation of two bonds is as follows:

a...

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