Answer letter c Exercise 2On January 1, 20x1, an entity issues bonds with face amount of P8,000,000 for P8,600,000. Thebonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entityincurs transaction costs of P81,645. The effective interest rate adjusted for transaction costs is 9%.Required:Compute for the initial carrying amount of the bondsCompute for net discount or net premium (including effect of bond issue cost) from theissuance on initial recognitionAre the periodic interest payments greater than or less than the periodic interest expenses?a.b.C.

Answered: Image /qna-images/answer/0ec979bd-b78c-4963-bebb-e216f014d603.jpg

Exercise 2 On January 1, 20x1, an entity issues bonds with face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transaction costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. Required: a. Compute for the initial carrying amount of the bonds b. Compute for net discount or net premium (including effect of bond issue cost) from the issuance on initial recognition Are the periodic interest payments greater than or less than the periodic interest expenses? C.

Exercise 2 On January 1, 20x1, an entity issues bonds with face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transaction costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. Required: a. Compute for the initial carrying amount of the bonds b. Compute for net discount or net premium (including effect of bond issue cost) from the issuance on initial recognition Are the periodic interest payments greater than or less than the periodic interest expenses? C.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 70E

See similar textbooks

Similar questions

Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Cornerstone Exercise 9-22 Reporting Long-Term Debt on the Balance Sheet Dennis Corp. has the following bonds: $2,000,000 in bonds that have $10,000 of unamortized discount associated with them $500,000 in bonds that have $25,000 of unamortized premium associated with them. Required: Prepare the balance sheet presentation for these two bonds.
Exercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on January 1, 2020. Interest is paid annually on December 31. The principal and the final interest payment are due on December 31, 2021. Required: Prepare the entry to recognize the issuance of the bonds. Prepare the journal entry for December 31, 2020. Prepare the journal entry to record repayment of the principal on December 31, 2021. CONCEPTUAL CONNECTIONHow would the interest expense for 2020 change if the bonds had been issued at a premium?
Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of discount D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of discount
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
Problem 1: On August 31, 2021, DASHER Company issued at 104 plus accrued interest, three thousand 10% bonds with a face amount of ₱1,000 per bond. The bonds are dated April 1, 2021, mature on March 31, 2026, and pay interest every April 1 and October 1. The bonds were issued through an underwriter to whom the entity paid bond issue cost of ₱120,000. Requirements:3. How much is the interest paid for the year ended December 31, 2021?4. How much accrued interest payable should be recognized at year-end, December 31, 2021?5. How much is the interest expense for the year ended December 31, 2021?6. How much is the carrying value of the bond on December 31, 2021?
Q-3: Dawlance Company issues 12%, 10-year bonds with a par value of Rs. 200,000 and annual interest payments. On the issue date, the annual market rate for these bonds is implies a selling price of 112. The effective interest method is used to allocate interest expense. A. What are the issuer's cash proceeds from issuance of these bonds? B. What total amount of bond interest expense will be recognized over life of these bonds? C. What amount of bond interest expense is recorded on the first interest payment date? D. Prepare the journal entries for the issuance of the bonds. Also calculate market price. 10%, which
On April 1, 20x1, an entity issues bonds with face amount of P5,000,000 for P5,415,183, including accrued interest. The bonds are dated January 1, 20x1 and pay annual interest of 14% every December 31. The effective interest rate is 12%. Requirements: a. Compute for the interest expense in 20x1.
On January 1, 20x1, an entity issues bonds with a face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transaction costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. ◦Requirements: ◦A. Compute for the initial carrying amount of the bonds. ◦B. Compute for the net discount or net premium (including the effect of the bond issue cost) from the issuance on initial recognition. ◦C. Are the periodic interest payments greater than or less than the periodic interest expenses? ◦D. Prepare all the journal entries during the term of the bonds.
Question Related data of John-j Company: Face amount P2,550,000 Nominal rate 12% Effective rate 14% Date of issue January 1, 2021 Annual payment every December 31 P850,000 (Principal and interest) Interest is payable annually December 31 The entity used 3 decimal places for the PVF. Required: What is the present value of the bonds payable on January 1, 2021?