Classifying Bond Transactions- Direct MethodCambell Inc. issued $180,000, 6%, 10-year bonds on January 1, for $155,844, with interest payments due annually at the end of each year. The amount of thediscount amortization in year one is $1,667 using the effective interest method.Indicate the impact on the (a) operating activities section and the (b) financing activities section of the statement of cash flows, assuming the direct method inpresenting cash flows from operating activities.• Note: Indicate a subtraction in the statement of cash flows with a negative sign in the Amount column.• Note: If an item is not included in the statement of cash flows, enter zero (leave blank) in the Amount column, and enter "N/A" in the Cash Flow Sectioncolumn.ItemCash payment of interestAmortization of discount on bonds payable $Issuance of bonds payable$AmountCash Flow Section0 * N/A1,667 * Operating activities section155,844✓ Financing activities sectionXX

The cash payment of interest is a cash outflow in the operating activities. It will reduce the total…

Answered: Classifying Bond Transactions- Direct…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, Year 1, Victor Company issued bonds with a $269,000 face value, a stated rate of interest of 5%, and a 5-year term to maturity. The bonds sold at 96. Interest is payable in cash on December 31 of each year. Victor uses the straight-line method to amortize bond discounts and premiums. What is the amount of cash flow from operating activities on the statement of cash flows for the year ending December 31, Year 3? Multiple Choice $15,602 $13,450 $12,700 $10,760
A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under a. noncash investing and financing activities b. operating activities c. investing activities d. financing activities
On January 1, Year 1, Residence Company issued bonds with a $50,000 face value. The bonds were issued at face value. They had a 20 year term and a stated rate of interest of 7%. Which of the following shows how the payoff of the bond liability will affect Residence’s financial statements on December 31, Year 20 (the maturity date)? Balance Sheet Income Statement Statement of Cash Flows Assets = Liab. + Equity Rev. − Exp. = Net Inc. A. NA = NA + NA NA − NA = NA (50,000) IA B. NA = NA + NA NA − NA = NA (50,000) FA C. 50,000 = 50,000 + NA NA − NA = NA 50,000 IA D. (50,000) = (50,000) + NA NA − NA = NA (50,000) FA
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1. 2a. Journalize the entry to record the first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method.Compute the price of $42,601,480 received for the bonds by using the present value tables
Entries for Issuing and Calling Bonds; Gain Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $15,000,000 of 20-year, 9% callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: Issued the bonds for cash at their face amount. Paid the interest on the bonds. Called the bond issue at 96, the rate provided in the bond indenture. (Omit entry for payment of interest.) For a compound transaction, if an amount box does not require an entry, leave it blank.
Present entries to record the selected transactions described below: Required: a. Issued $2,750,000 of 10-year, 8% bonds at 97.* b. Amortized bond discount for a full year, using the straight-line method.* c. Called bonds at 98. Assume the bonds were carried at $2,692,250 at the time of the redemption.* *Refer to the Chart of Accounts for exact wording of account titles. General Journal a. Issued $2,750,000 of 10-year, 8% bonds at 97 on January 1. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 b. Amortized bond discount for a full year, using the straight-line method, on December 31. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL…
On the first day of the fiscal year, a company issues a $980,000, 8%, 5-year bond that pays semiannual interest of $39,200 ($980,000 × 8% × 1/2), receiving cash of $884,177. Required: Journalize the entry to record the issuance of the bonds. Refer to the Chart of Accounts for exact wording of account titles. Chart Of Accounts CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Notes Receivable 115 Interest Receivable 121 Merchandise Inventory 122 Supplies 131 Prepaid Insurance 140 Land 151 Building 152 Accumulated Depreciation-Building 153 Equipment 154 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 241 Notes Payable 242 Interest Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 310…
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $90,000,000 of four-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. d. The amount of the bond interest expense for the first year. Round to the nearest dollar. $
On January 1, Year 1, Jones Company issued bonds with a $250,000 face value, a stated rate of interest of 8.5%, and a 5-year term to maturity. The bonds were issued at 98. Interest is payable in cash on December 31st of each year. The company amortizes bond discounts and premiums using the straight-line method. What is the amount of cash outflow from operating activities shown on Jones' statement of cash flows for the year ending December 31, Year 2? Multiple Choice $21,250 $22,250 $20.250 $23,250
Consider the following independent situations: a. On March 1, 2020, Heide Co. issued at 103 plus accrued interest $3,000,000, 9% bonds. The bonds are dated January 1, 2020, and pay interest semiannually on July 1 and January 1. In addition, Heide Co. incurred $27,000 of bond issuance costs. Compute the net amount of cash received by Heide Co. as a result of the issuance of these bonds. b. On January 1, 2020, Reymont Co. issued 9% bonds with a face value of $500,000 for $469,280 to yield 10%. The bonds are dated January 1, 2020, and pay interest annually. What amount is reported as bond discount on the issue date? Prepare the journal entry to record interest expense on December 31, 2020. c. Czeslaw Building Co. has a number of long-term bonds outstanding at December 31, 2020. These long-term bonds have the following sinking fund requirements and maturities for the next 6 years. Sinking Fund Maturities 2021 $300,000 $100,000 2022 100,000 250,000 2023…
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $70,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. 4,900,000 X b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 X d. The amount of the bond interest expense for the first year. Round to the nearest dollar. 4,900,000 X Feedback Check My Work Remember, the selling price of a bond is the sum of the present values of:…
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $40,000,000 of five-year, 13% bonds at a market (effective) interest rate of 11%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest

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