Question six:On January 1, 2022, Kirmer Corp. purchased €450, 000 of 6% bonds,interest payable on January 1 and July 1, for €428,800 (a 7% effective interest rate). Thebonds mature on January 1, 2028. Record amortization and interest revenue on theappropriate dates by the effective - interest method (round to the nearest dollar). (Assumebonds are non-trading.) Instructions (a) Prepare the entry for January 1, 2022. (b) Thebonds are sold on October 1, 2022 for €427,000 plus accrued interest. Prepare all entriesrequired to properly record the sale. Solution

Bonds/Notes are the instruments/ securities issued by the companies to raise funds for the company…

Answered: Question six: On January 1, 2022,…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.3P

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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.
Transfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 8%, 100,000 face value bonds had a carrying value of 107,023.56 and were being amortized using the effective interest method based on a market rate of 7%. Interest on these bonds is paid annually each December 31. On December 31, 2019, after recording the interest earned, Leslie decided to reclassify the Kaufmann bonds to its available-for-sale category in anticipation of a major restructuring. At that time, the ending quoted market price for the bonds was 105,000. Required: Prepare the journal entries on December 31, 2019, to record the interest earned and the reclassification.
On January 1, 2024, a company issues a $3, 500, 000, 10%, 5-year bonds that pays semiannual interest on July 1 and January 1. Assume the bonds were sold at: A. 92% B. 102% Instructions: For A and B journalize the issuance of the bonds. Journalize the first and second interest payment, using straight line amortization. Compute the bond's price (present value) assuming the following market interest: A. 12.5% B. 8.5%
1- On January 1, 2019, Garfield AG made an investment in €70,000 of the 9%, 5-year bonds of Chester Corporation for €74,000, which provides an 11% return. Garfield plans to actively trade the bonds to profit from market interest rate changes. Prepare Garfield's journal entries for (a). the purchase of the investment, (b). the receipt of annual interest and discount amortization, and (c). the year-end fair value adjustment. The bonds have a year-end fair value of €76,000.
1. Sandhill Company purchased, on January 1, 2025, as an available-for-sale security, $440,000 of the 6%, 5-year bonds of Oak Corporation for $380,203, which provides an 8% return. The bonds pay interest semi-annually on June 30th and December 31st. For this case, prepare an amortization table. Use the effective-interest method for discount and premium amortization (construct an amortization table). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.) Maturity Value of Bonds Purchase Price of Bonds Stated Interest Rate Bond Yield Rate Interest Payment Term (fraction of annual) Date Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds 1/1/2025 6/30/2025 12/31/2025 6/30/2026 12/31/2026 6/30/2027 12/31/2027 6/30/2028 12/31/2028 6/30/2029 12/31/2029 6/30/2030…
(a) Stellar Co. sold $1,950,000 of 12%, 10-year bonds at 106 on January 1, 2020. The bonds were dated January 1, 2020, and pay interest on July 1 and January 1. If Stellar uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2020, and December 31, 2020. (Round answer to O decimal places, e.g. 38,548.) Interest expense to be recorded $ Interest expense to be recorded LA (b) Pearl Inc. issued $570,000 of 9%, 10-year bonds on June 30, 2020, for $471,929. This price provided a yield of 12% on the bonds. Interest is payable semiannually on December 31 and June 30. If Pearl uses the effective-interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2020. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to O decimal places, e.g. 38,548.) $ 111150 LA
(a) Novak Co. sold $2,080,000 of 12%, 10-year bonds at 105 on January 1, 2020. The bonds were dated January 1, 2020, and pay interest on July 1 and January 1. If Novak uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2020, and December 31, 2020. (Round answer to 0 decimal places, e.g. 38,548.) Interest expense to be recorded $ ?
(c) Assume that on July 1, 2027, Swifty Co. redeems half of the bonds at a cost of $1,126,600 plus accrued interest. Prepare the journal entry to record this redemption. (Round present value factor to 5 decimal places, e.g. 1.24356 and final answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Date July 1, 2027 July 1, 2027 Account Titles and Explanation (To record interest) (To record reacquisition) Debit Credit 11 TILL
Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Using the effective-interest amortization method On December 31, 2018, when the market interest rate is 6%, Benson Realty issues $700,000 of 6.25%, 10-year bonds payable. The bonds pay interest semiannually. Benson Realty received $713,234 in cash at issuance. Requirements Prepare an amortization table using the effective interest amortization method for the first two semiannual interest periods. (Round to the nearest dollar.) Using the amortization table prepared in Requirement 1, journalize issuance of the bonds and the first two interest payments.
2. On January 1, 2020, Novotna Company purchased $1,000,000, 6% bonds of Aguirre Co. for $947,574. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2023. Novotna Company uses the effective-interest method to amortize discount or premium. Assume the bond is classified as available for sale. The fair value of Aguirre bonds is $960,686 on December 31, 2020 and $975,122 on December 31, 2021. Prepare the necessary adjusting entry on December 31, 2021
1.On July 1, 2018, TRES Company purchased an 8-yr, 12% bonds with a face value of ₱ 4,875,000 at 102 plus accrued interest to be recognized at amortized cost. The bonds mature on June 30, 2022 and pay interest semi-annually on April 1 and October 1. How much should be reported as interest receivable as of December 31, 2019? 2.On July 1, 2018, TRES Company purchased an 8-yr, 12% bonds with a face value of ₱ 4,875,000 at 102 plus accrued interest to be recognized at amortized cost. The bonds mature on June 30, 2022 and pay interest semi-annually on April 1 and October 1. How much is the cash paid upon acquisition?
5 On November 1, 2022, Dayrit Corporation purchased P800,000 face value, 10-year, 8% term bonds dated October 1, 2022 for P700,000 to yield 10% plus accrued interest. Interest is receivable every April 1 and October 1. What amount should Dayrit report as interest receivable in its December 31, 2022 balance sheet?

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