170 outof170points(100%) - MGMT-026
?
170 outof170points(100%)
award:
1. 10 out of 10.00
Tano issues bonds with a par value of $180,000 on January 1, 20 13. The bonds' annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $170,862.
1. What is the amount of the discount on these bonds at issuance?
Discount
$
9,1 38.I
2. How much total bond interest expense will be recognized ov er the life of these bonds?
iTotal bond interest expense over fife of bonds:
Amount repaid:
6.1 payments of
$
--~
Par v alue at maturity
7,200.I $
43,200 180,000. I
Total repaid Less amount borrowed
- - -223,200 170,862. I
Total bond interest expense
$
3. Use the straight-line method to amortize the discount for these bonds.
Semiannual PeriodEnd
01/01/20 13 06/30/20 13 12/3 1120 13 06/30120 14 12/31/20 14 06/30120 15 12/3 112015
Unamortized Discount
carrying Value
$
9,1 38,./ $
1 70,862. I
7,615.,I
1 72,385. I
6,092,./
173,908. I
4,569,./
175,43 1.I
3,046,./
1 76,954. I
1,523
178,477
$
0 $
180,000
award:
2.
10 out of 10.00
Prepare the journal entries for the issuance of th e bonds in both OS 14-1 and OS 14-2. Assume that both bonds are issued for cash on January 1, 20 13.
1. Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate forthese bonds is 10%, which implies a selling price of 87 112. The straight?line method is use d to allocate interest expense.
Date
General Journal
Debit
Credit
Jan. 1, 20 11
-
J.cash Discount on bonds payable
Bonds payable
./ 218,750./
./
31,250. /1
./]
250,000. /
2. Garcia Company issues 10%, 15?year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate forthese bonds is 8%, which implies a selling price of 11 7 1/4 . The effective interest method is used to allocate interest expense.
Date Jan. 1, 20 11
II
General Journal
Gash
Bonds payable
Premium on bonds payable
Debit
Credit
./ 28 1,400./1
./
240,000. /
./
41,400. /
m.vard:
3. 10 out of
.................. ??1p0o.i0n0ts??.....................................................................................................................................................................................................................
Sylvestor Company issues 10%, five-year bonds, on December 31, 20 12, with a par value of $100,000 and semiannual interest payments.
Semiannual Period-End (0) 1213 112012 (1) 6130120 13 (2) 12/3112013
Unamortized Discount $ 7,360 6,624
5,888
Carrying Value $ 92,640
93,376 94, 11 2
Use the above bond amortization table and prepare journal entries to record the following. (a) The issuance of bonds on December 31, 20 12.
Date Dec. 31
General Journal Cash Discount on bonds payable
Bonds payable
(b) The first interest payment on June 30, 20 13.
Debit
Credit
.I
92,6 40. /
.I
7,360. /
.I
1 00,000. /
Date
General Journal
Jun 30
_[Bond interest expense
Gash Discount on bonds payable
(c) The second interest payment on December 31, 20 13.
Debit
Credit
.I
5,736. /J
./
5,000. /
vii
I
736. /
Date Dec.31
General Journal Bond interest expense
Cash Discount on bonds payable
Debit
Credit
.I
5,736. /
'-
.I
5,000. /
.I
736. /
4.
award:
10 out of
10.00
Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 V4. The effective interest method is used to allocate interest expense.
1. What are the issuer's cash proceeds from issuance of these bonds?
~,;s;h~pr;o,.;,c;;e;,.e;;,d.;;,s.;_ _ _ $ 28 1,400.I
2. What total amount of bond interest expense will be recognized over the life of these bonds?
:rotaI bond interest expense over Die of bonds:
- - - - Amount repaid:
30.I payments of
$
--~--
Par value at maturity
12,000.1 $
Total repayments
Less amount borrowed
Total bond interest expense
$
360,000 240,000V" 600,000 28 1,400.I 318,600
3. What is the amount of bond interest expense recorded on the first interest payment date?
Bond interest expense
$ 11,256.I
? P ................
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