Question

In: Accounting

On Jan 1, 2019 Noelle’s Napkin Company issues $4,000,000 8% 20 year bonds at an EFFECTIVE...

On Jan 1, 2019 Noelle’s Napkin Company issues $4,000,000 8% 20 year bonds at an EFFECTIVE Interest Rate of 6% and interest payable semi-annually on June 30th and Dec 31st .

Required:

USE the Present Value of a $1 (lumpsum) and Present value of an Annuity to calculate the Issue value of the BOND.

  1. Record the issuance of the bonds
  2. Prepare the Effective Interest Schedule for 5 years
  3. Record the interest entries for Jun 30th& Dec 31st 2019
  4. What is the carrying value of the BOND on Dec 31st 2021?

Solutions

Expert Solution

Semi annual cash interest = 4000,000*8%*6/12 = 160000
n= 40
I = 3%
Cashflows Amount$ PVf Present value
Semi annual cash interest    1,60,000 23.11477 3698363
Maturity value 40,00,000 0.306557 1226228
Price of bonds 4924591
Journal entry
S.no. Accounts title and explanations Debit $ Credit $
01.01.19 Cash account 4924591
    Bonds payable 40,00,000
    Premium on bonds payable 9,24,591
(for issuance of bonds)
Amort Chart
Period Cash Int Int exp Premium Unamort Carrying
amortized Premium Value of bonds
01.01.19 924591 4924591
30.06.19 160000 147738 12262 912329 4912329
31.12.19 160000 147370 12630 899699 4899699
30.06.20 160000 146991 13009 886690 4886690
31.12.20 160000 146601 13399 873290 4873290
30.06.21 160000 146199 13801 859489 4859489
31.12.21 160000 145785 14215 845274 4845274
30.06.22 160000 145358 14642 830632 4830632
31.12.22 160000 144919 15081 815551 4815551
30.06.23 160000 144467 15533 800017 4800017
31.12.23 160000 144001 15999 784018 4784018
Req c.
Journal entry
S.no. Accounts title and explanations Debit $ Credit $
30.06.19 Interest expense 147738
Premium on bonds payable 12262
     Cash account 160000
(for interest expense incurred)
31.12.19 Interest expense 147370
Premium on bonds payable 12630
     Cash account 160000
(for interest expense incurred)
Req d.
Balance Sheet
Bonds payable-Gross 40,00,000
Add: Unamortized premium 845274
Bonds payable-Net 48,45,274

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

On Jan 1, 2019 Noelle’s Napkin Company issues $4,000,000 8% 20 year bonds at an EFFECTIVE...
On Jan 1, 2019 Noelle’s Napkin Company issues $4,000,000 8% 20 year bonds at an EFFECTIVE Interest Rate of 6% and interest payable semi-annually on June 30th and Dec 31st . Required: USE the Present Value of a $1 (lumpsum) and Present value of an Annuity to calculate the Issue value of the BOND. Record the issuance of the bonds Prepare the Effective Interest Schedule for 5 years Record the interest entries for Jun 30th& Dec 31st 2019 What is...
Jan 1, 2017, Ky Corporation issues $4,000,000 of 10 percent, five year bonds at 92.79. Interest...
Jan 1, 2017, Ky Corporation issues $4,000,000 of 10 percent, five year bonds at 92.79. Interest is paid ANNUALLY, and the effective interest rate of 12% is used for amortization. What amount was received for the bonds? Make Journal entries for the Jan 1 issuance of the bond and the first two interest transactions: December 31, 2017 (accrual) and Dec 31, 2018 (accrual).
Hillside issues $4,000,000 of 6%, 15-year bonds dated January 1, 2019, that pay interest semiannually on...
Hillside issues $4,000,000 of 6%, 15-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,456,448. Required: 1. Prepare the January 1 journal entry to record the bonds’ issuance. 2(a) For each semiannual period, complete the table below to calculate the cash payment. 2(b) For each semiannual period, complete the table below to calculate the straight-line discount amortization. 2(c) For each semiannual period, complete the table...
A company issues $24950000, 5.8%, 20-year bonds to yield 6% on January 1, 2019. Interest is...
A company issues $24950000, 5.8%, 20-year bonds to yield 6% on January 1, 2019. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24373285. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2021? (Round answer to 0 decimal place, e.g. 52.) $24459792 $24468179 $24806169 $24425679
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 20X9. Interest is...
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 20X9. Interest is paid on July 1and January 1. The proceeds from the bond issue amount to $14,703,109. The company uses the effective interest method for amortization and has fiscal year end of December 31. Prepare the journal entries for the following dates: 01/01/20X9 and 12/31/20X9 .
A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is...
A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2015?
A company issues $25750000, 7.8%, 20-year bonds to yield 8% on January 1, 2016. Interest is...
A company issues $25750000, 7.8%, 20-year bonds to yield 8% on January 1, 2016. Interest is paid on June 30 and December 31. The proceeds from the bonds are $25240330. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2018?
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is...
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108. Using effective-interest amortization, how much interest expense will be recognized in 2017? a. $585,000 b. $1,170,000 c. $1,176,373 d. $1,176,249 (please show work)
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is...
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108. a) Using effective-interest amortization, how much interest expense will be recognized in 2017? b) Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2017 balance sheet? c) Using straight-line amortization, what is the carrying value of the bonds on December 31, 2018? d)...
A company issues $4,000,000 of 6%, 15-year bonds dated January 1, 201, that pay interest semiannually...
A company issues $4,000,000 of 6%, 15-year bonds dated January 1, 201, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,456,448. 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance. 2. For each semiannual period, compute the (a) cash payment, (b) the straight line amortization, and (c) bond interest expense. 3. Determine the total bond interest expense to be recognized over the bonds life. 4. Prepare...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT