Question
In: Accounting
On January 1, Year 1, Victor Company issued bonds with a $750,000 face value, a stated...
On January 1, Year 1, Victor Company issued bonds with a $750,000 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 interest expense appearing on the income statement for the year ending December 31, Year 3?
Solutions
Expert Solution
Interest expense in year 3= $ 43,500
Working
| Changes During the Period | Ending Bond Liability Balance | |||||
| Period Ended | Cash Paid | Discount Amortized | Interest expense | Bonds payable | Discount on Bonds payable | Carrying Value |
| Start | $ 750,000 | $ 30,000 | $ 720,000 | |||
| Ye 1 | $ 37,500 | $ 6,000* | $ 43,500 | $ 750,000 | $ 24,000 | $ 726,000 |
| Ye 2 | $ 37,500 | $ 6,000 | $ 43,500 | $ 750,000 | $ 18,000 | $ 732,000 |
| Ye 3 | $ 37,500 | $ 6,000 | $ 43,500 | $ 750,000 | $ 12,000 | $ 738,000 |
| Ye 4 | $ 37,500 | $ 6,000 | $ 43,500 | $ 750,000 | $ 6,000 | $ 744,000 |
| Ye 5 | $ 37,500 | $ 6,000 | $ 43,500 | $ 750,000 | $ - | $ 750,000 |
*30000/5
ekkarill92 answered 1 year agoRelated Solutions
On January 1, Year 1, Victor Company issued bonds with a $750,000 face value, a stated...
On January 1, Year 1, Victor Company issued bonds with a
$750,000 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 carrying value
of the bond liability at December 31, Year 3?
On January 1, Year 1, Victor Company issued bonds with a $650,000 face value, a stated...
On January 1, Year 1, Victor Company issued bonds with a
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term to maturity. The bonds sold at 95. 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 carrying value
of the bond liability at December 31, Year 3?
On January 1, Year 1, Victor Company issued bonds with a $650,000 face value, a stated...
On January 1, Year 1, Victor Company issued bonds with a
$650,000 face value, a stated rate of interest of 6%, and a 5-year
term to maturity. The bonds sold at 95. 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
interest expense appearing on the income statement for the year
ending December 31, Year 3?
Victor Company issued bonds with a $250,000 face value and a 6%stated rate of interest...
Victor Company issued bonds with a $250,000 face value and a 6%
stated rate of interest on January 1, Year 1. The bonds carried a
5-year term and sold for 95. Victor uses the straight-line method
of amortization. Interest is payable on December 31 of each
year.The carrying value of the bond liability on the December 31,
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On January 1, Year 1, Mudpond Company issued bonds with a $400,000 face value, a stated...
On January 1, Year 1, Mudpond Company issued bonds with a
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The market rate of interest on the date of issuance was 4%.
Interest is paid annually on December 31.
REQUIRED:
Complete the amortization schedule below:
Cash Payment
Interest Expense
Amortization
Carrying Value
1/1/Year 1
12/31/Year 1...
On January 1 of this year, Victor Corporation sold bonds with a face value of $1,560,000...
On January 1 of this year, Victor Corporation sold bonds with a
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mature in four years and pay interest semiannually every June 30
and December 31. Victor uses the straight-line amortization method
and also uses a premium account. Assume an annual market rate of
interest of 8 percent.
1. Prepare the journal entry to record the
issuance of the bonds.
2. Prepare the journal entry to record...
On January 1 of this year, Victor Corporation sold bonds with a face value of $1,560,000...
On January 1 of this year, Victor Corporation sold bonds with a
face value of $1,560,000 and a coupon rate of 10 percent. The bonds
mature in four years and pay interest semiannually every June 30
and December 31. Victor uses the straight-line amortization method
and also uses a premium account. Assume an annual market rate of
interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of
$1) (Use the appropriate factor(s) from the...
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was payable in cash on December 31st of each year. Jacobs uses the
straight-line method to amortize bond discounts and premiums. Based
on this information alone, how does the recognition of interest
expense during Year 1 affect the company’s accounting equation?
Multiple Choice
Increase...
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