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.

Expert Solution

ekkarill92 answered 8 months ago

On January 1, 2018, the company had issued $1,200,000 par value, 7%, five-year bonds at a...

On January 1, 2018, the company had issued $1,200,000 par value, 7%, five-year bonds at a price of $1,251,176. Interest was payable semiannually on June 30 and December 31. The market rate of interest was 6% on the date the bond were issued. On March 1, 2019, the company extinguished 40% of the bonds outstanding by issuing 15,000 of its common shares. It also paid in cash all interest due up to March 1, 2019 on these bonds. The market...

Carlyle Corporation had the following bond transactions during the fiscal year 2017: On January 1: issued...

Carlyle Corporation had the following bond transactions during the fiscal year 2017: On January 1: issued ten $10,000 bonds at 101. The 5-year bonds are dated January 1, 2017. The contract interest rate is 5%. Straight-line amortization method is used. Interest is payable semi-annual on January 1 and July 1. On July 1: Carlyle Corporation issued $500,000 of 10%, 10-year bonds. The bonds dated January 1, 2017 were issued at 88, and pay interest on July 1 and January 1....

On January 1 of this year, Ikuta Company issued a bond with a face value of...

On January 1 of this year, Ikuta Company issued a bond with a face value of $145,000 and a coupon rate of 7 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 8 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final...

. The Rangaletta Company issues a five-year, zero-coupon bond on January 1, Year One. The bond...

. The Rangaletta Company issues a five-year, zero-coupon bond on January 1, Year One. The bond has a face value of $200,000 and is issued to yield an effective interest rate of 9 percent. Rangaletta receives $129,986. On January 1, Year Three, Rangaletta pays off the bond early by making a payment of $155,000 to the bondholder. Make all journal entries from January 1, Year One, through January 1, Year Three assuming the effective rate method is applied. 6. Do...

On January 1, the first day of the fiscal year pretenders company issued $24,200 of five...

On January 1, the first day of the fiscal year pretenders company issued $24,200 of five years, 11% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market ( effective) interest rate of 13% resulting in pretender company receiving cash of $22,460,399 A. Journalize the entries to record the following 1. Issuance of the bond 2. First semiannual interest payment. The bond discount is combined with the...

On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee...

On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following transactions. Refer to the Chart of Accounts for exact wording of account titles. Year 1 Jan. 1 Issued the note for cash at its face amount. Dec. 31 Paid the annual payment on the note, which consisted of interest of $7,200 and principal...

On January 1, Year 1, Sayers Company issued $273,000 of five-year, 5 percent bonds at 102....

On January 1, Year 1, Sayers Company issued $273,000 of five-year, 5 percent bonds at 102. Interest is payable semiannually on June 30 and December 31. The premium is amortized using the straight-line method. Required Prepare the journal entries to record the bond transactions for Year 1 and Year 2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Date General Journal Debit Credit Jan 01 Record the interest expenses and...

On January 1, the first day of its fiscal year, Pretender Company issued $18,500,000 of five-year,...

On January 1, the first day of its fiscal year, Pretender Company issued $18,500,000 of five-year, 10% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Pretender Company receiving cash of $17,138,298. Required: A. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles): 1. Issuance of the bonds. 2....

On January 1, the first day of its fiscal year, Pretender Company issued $18,400,000 of five-year,...

On January 1, the first day of its fiscal year, Pretender Company issued $18,400,000 of five-year, 12% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 14%, resulting in Pretender Company receiving cash of $17,107,672. Required: A. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles): 1. Issuance of the bonds. 2....

On January 1, the first day of its fiscal year, Chin Company issued $10,000,000 of five-year,...

On January 1, the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Chin Company receiving cash of $9,594,415. Required: A. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles): 1. Issuance of the bonds. 2....

Question