Figaro Company had the following information regarding a five-year bond that it issued on January 1,...

Figaro Company had the following information regarding a five-year bond that it issued on January 1, 2019.

	Cash	Interest	Amount	Carrying
	Paid	Expense	Amortized	Value
Date	3%	4%

1/1/19				$643,249
7/1/19	$21,000	$25,729.96	$4,729.96	$647,978.86
1/1/20	$21,000	$25,919.15	$4,919.15	$652,898.01
7/1/20	$21,000	$26,115.92	$5,115.92	$658,013.93
1/1/21	$21,000	$26,320.56	$5,320.56	$663,334.49
7/1/21	$21,000	$26,533.38	$5,533.38	$668,867.87
1/1/22	$21,000	$26,754.71	$5,754.71	$674,622.58
7/1/22	$21,000	$26,984.90	$5,984.90	$680,607.49
1/1/23	$21,000	$27,224.30	$6,224.30	$686,831.78
7/1/23	$21,000	$27,473.27	$6,473.27	$693,305.06
1/1/24	$21,000	$27,732.20	$6,732.20	$700,037.26

Required:

What is the coupon (face) rate of the bond?
What is the effective interest rate of the bond?
Was the bond issued at a premium, discount or par? How did you determine your answer?
How much total interest expense will Figaro report on this bond in the year 2021?
On what financial statement would Figaro report the interest expense?
How will Figaro report the bond on their 2021 Balance Sheet? Be specific.
What is the maturity value of the bond?
Assume that, on January 1, 2022, Figaro pays $686,000 to retire the bond. What is the gain or loss on redemption? Be sure to show your calculations and specify whether there was a gain or a loss.
Prepare a financial statement effects template or journal entries showing:

The issuance of the bond
The payment of interest on July 1, 2021
The redemption of the bond on January 1, 2022.

Solutions

Expert Solution

ekkarill92 answered 2 months ago

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