Question
In: Accounting
RKO Company sold bonds with a face value of $750,000 for $806,000. The bonds have a...
RKO Company sold bonds with a face value of $750,000 for $806,000. The bonds have a coupon rate of 7 percent, mature in 10 years, and pay interest annually every December 31. All of the bonds were sold on January 1 of this year. Record the sale of the bonds on January 1 and the payment of interest on December 31 of this year, without the use of a premium account. RKO uses the effective-interest amortization method. Assume an annual market rate of interest of 6 percent.
Record the sales of the bonds on January 1. Record the payment of interest on December 31 using effective-interest amortization.
Solutions
Expert Solution
Solution:
| Journal Entries - RKO Company | ||||
| Event | Date | Particulars | Debit | Credit |
| 1 | 1-Jan | Cash Dr | $806,000.00 | |
| To Bond Payable | $806,000.00 | |||
| (To record issue of bond) | ||||
| 2 | 31-Dec | Interest expense Dr ($806,000*6%) | $48,360.00 | |
| Bond Payable Dr | $4,140.00 | |||
| To Cash ($750,000*7%) | $52,500.00 | |||
| (To record interest expense and payment using effective interest method) | ||||
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 $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?
Conseco Inc. has the outstanding bonds maturing in 17 years and the bonds have a total face value of $750,000, a face value per bond of $1,000, and a market price of...
1.
Conseco Inc. has the outstanding bonds maturing in 17 years and the
bonds have a total face value of $750,000, a face value per bond of
$1,000, and a market price of $1,011 each. The bonds pay 8 percent
interest, semiannually. Also, the firm has 58,000 shares of common
stock outstanding at a market price of $36 a share. The common
stock just paid a $1.64 annual dividend and has a dividend growth
rate of 2.8 percent. There are...
Bonds: The company issued 80,000 bonds. The bonds have a $1,000 face value with 7.5% coupons...
Bonds: The company issued 80,000 bonds. The bonds have a $1,000
face value with 7.5% coupons with annual payments, 7 years to
maturity, and currently sell for $925. The marginal tax rate is
12%.
Common Stock: The company has 500,000 shares of common stock
outstanding, selling for $41 per share. The company’s beta is 1.25,
the risk free rate is 2%, and the market risk premium is 9%.
Preferred Stock: The company issued 100,000 shares of preferred
stock. Preferred stock...
Declension Company sold bonds that had a face (maturity) value of $1,000,000 on May 1, 2019...
Declension Company sold bonds that had a face (maturity) value
of $1,000,000 on May 1, 2019 for $900,000. The bonds had a 10 year
term with a maturity date of April 30, 2029. The annual interest
rate on the bonds is 12 percent which is paid semiannually each
October 31 and April 30. What entries should Declension Company
make on a. issuance of the bond on May 1, 2019 b. on payment of
interest on October 31, 2019 c. on...
Declension Company sold bonds that had a face (maturity) value of $1,000,000 on May 1, 2019...
Declension Company sold bonds that had a face
(maturity) value of $1,000,000 on May 1, 2019 for $900,000. The
bonds had a 10 year term with a maturity date of April 30, 2029.
The annual interest rate on the bonds is 12 percent which is paid
semiannually each October 31 and April 30.
What entries should Declension Company make on a.
issuance of the bond on May 1, 2019
b. On payment of interest on October 31, 2019
c. On...
22) On January 1, 2017, bonds with a face value of $94,000 were sold. The bonds...
22) On January 1, 2017, bonds with a
face value of $94,000 were sold. The bonds mature on January 1,
2027. The stated interest rate is 8% annually. The bonds pay
interest semiannually on July 1 and January 1. The market rate of
interest is 10% annually. What is the market price of the bonds?
(Round your final answer to the nearest dollar.)
1. On January 1, 2017, bonds with a face value of $94,000 were sold. The bonds...
1. On January 1, 2017, bonds with a face value of $94,000 were
sold. The bonds mature on January 1, 2027. The face interest rate
is 8% annually. The bonds pay interest semiannually on July 1 and
January 1. The market rate of interest is 10% annually. What is
the market price of the bonds? The present value of $1 for 20
periods at 5% is 0.377. The present value of an ordinary annuity
of $1 for 20 periods at...
GoNe GeArL Inc. sold (issued) some bonds on 1.1.17. The face value of the bonds was...
GoNe GeArL Inc. sold (issued) some bonds on 1.1.17.
The face value of the bonds was $1,000,000.
The bonds had a maturity date of 5 years.
The interest rate on the bonds was 5% (contract rate).
The market interest rate was 6%.
Interest is paid annually on January 1.
1. Determine the amount of proceeds for the
sale (issuance) of these bonds.
2. Prepare the journal entry for the issuance
of the bonds on 1.1.17.
Bonds with a face value of $1,000,000 are sold at 98. What is the journal entry...
Bonds with a face value of $1,000,000 are sold at 98. What is
the journal entry to record the sale of the bonds?
Cash
1,000,000
Gain on Sale of
Bonds
20,000
Bonds
Payable
980,000
Cash
980,000
Loss on Sale of
Bonds
20,000
Bonds
Payable
1,000,000
Cash
980,000
Bonds
Payable
980,000
Cash
1,000,000
Bonds
Payable
1,000,000
A corporation has Bonds Payable with a face value of $1,000,000
and an amortized cost
( carrying value ) of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Write the Pros and cons of the second and third generation of the solar photovoltaic cells.
- What is the length of a one-dimensional box in which an electron in the n =...
- Discuss what you know on the lean thinking,system and types of waste with giving examples ....
- Explain the IS-LM model?
- You are to post an example of a business plan you developed for the development or...
- . Health and safety training needs analysis has not been conducted for two years, what is...
- This research report is broken into two parts: Use the Internet to research information on the...
ADVERTISEMENT