Question
In: Accounting
On January 1, 2012, bronco Inc. issued bonds with a face amount of $3,000,000. Brono received...
On
January 1, 2012, bronco Inc. issued bonds with a face amount of
$3,000,000. Brono received proceeds of $3,240,000 upon issuance,
representing a yield on the bonds of 8%. The firm pays $150,000 of
interest on June 30 and $150,000 on December 31 in connection with
these bonds. What was the carrying value of these bonds at December
31, 2012, after the second interest payment?
Solutions
Expert Solution
| Semi-annual Coupon interest rate=150000/3000000= | ||||||
| 5% | ||||||
| Annual Yield = 8% | ||||||
| Semi-annual yield= 8%/2=4% | ||||||
| Carrying value of bonds at issuance=3240000 | ||||||
| Premium on issue to be amortised= 3240000-3000000=240000 | ||||||
| Partial Bond premium amortisation -Effective interest rate method | ||||||
| 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Date | Stated int.payment | Interest expense | Amortisation of bond premum | Credit balance in Prem. a/c | Cr. Bal.in bonds payable a/c | Carrying Value of the bonds |
| (FV*5%) | (Prev. carrying value in col.7 *4%) | (3-2) | Prev. Bal. in Col. 5- current col.4 | (5+6) | ||
| Jan 1,2012 | 240000 | 3000000 | 3240000 | |||
| 30-Jun | 150000 | 129600 | -20400 | 219600 | 3000000 | 3219600 |
| Dec 31,2012 | 150000 | 128784 | -21216 | 198384 | 3000000 | 3198384v |
| Journal entries | |||
| Date | Account Titles | Debit | Credit |
| Jan 1,2012 | On Issue | ||
| Cash | 3240000 | ||
| Bonds payable | 3000000 | ||
| Premium on bonds payable | 240000 | ||
| 30-Jun-12 | 1st Interest payment | ||
| Interest expense | 129600 | ||
| Premium on bonds payable | 20400 | ||
| Cash | 150000 | ||
| 31-Dec-12 | 2nd Interest payment | ||
| Interest expense | 128784 | ||
| Premium on bonds payable | 21216 | ||
| Cash | 150000 | ||
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000,...
On January 1, 2020, Scottsdale Company issued its 12% bonds in
the face amount of $3,000,000, which mature on January 1, 2032. The
bonds were issued for $$3,408,818 to yield 10%. Scottsdale uses the
effective-interest method of amortizing bond premium. Interest is
payable annually on December 31. The 12/31/23 Premium on Bond
Payable balance is:
On January 1, 2021, Charles, Inc., issued 12% bonds with a face amount of $17 million....
On January 1, 2021, Charles, Inc., issued 12% bonds with a face
amount of $17 million. The bonds were priced at $14 million to
yield 14%. Interest is paid semiannually on June 30 and December
31. Charles’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Charles report in its
balance sheet at September 30, 2021?
2. What amount(s) related to the bonds would Charles report in its
income statement for the year ended September...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $75 million,...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a
face amount of $75 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.) Required: 1-a.
Determine the price of the bonds at January 1, 2018....
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $49 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2019, Bradley, Inc., issued 12% bonds with a face amount of $66 million,...
On January 1, 2019, Bradley, Inc., issued 12% bonds with a face
amount of $66 million, dated January 1. The bonds mature in 2040
(20 years). The market yield for bonds of similar risk and maturity
is 12%. Interest is paid semiannually.
Instructions
1. Determine the price of the bonds at January 1, 2019,
and prepare the journal entry to record their issuance by
Bradley.
2. Assume the market rate was 8,5%. Determine the price
of the bonds at January...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $55 million,...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a
face amount of $55 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2021, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...
On January 1, 2021, Instaform, Inc., issued 10% bonds with a
face amount of $49 million, dated January 1. The bonds mature in
2040 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required: 1-a. Determine the price of the bonds at January 1,
2021....
On January 1, 2021, Instaform, Inc., issued 12% bonds with a face amount of $65 million,...
On January 1, 2021, Instaform, Inc., issued 12% bonds with a
face amount of $65 million, dated January 1. The bonds mature in
2040 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2021....
On January 1, 2021, Baddour, Inc., issued 10% bonds with a face amount of $168 million....
On January 1, 2021, Baddour, Inc., issued 10% bonds with a face
amount of $168 million. The bonds were priced at $147.2 million to
yield 12%. Interest is paid semiannually on June 30 and December
31. Baddour’s fiscal year ends September 30. Required: 1. What
amount(s) related to the bonds would Baddour report in its balance
sheet at September 30, 2021? 2. What amount(s) related to the bonds
would Baddour report in its income statement for the year ended
September...
On January 1, 2021, Charles, Inc., issued 12% bonds with a face amount of $17 million....
On January 1, 2021, Charles, Inc., issued 12% bonds with a face
amount of $17 million. The bonds were priced at $14 million to
yield 14%. Interest is paid semiannually on June 30 and December
31. Charles’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Charles report in its
balance sheet at September 30, 2021?
2. What amount(s) related to the bonds would Charles report in its
income statement for the year ended September...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- What 2 things happen to the melting point of a solid when an impurity is present?
- How Can Hominin Evolution be characterized as " mosaic evolution" Use examples of species from the...
- Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of...
- Mobile and wireless devices are being increasingly used in the Business Administration and Management Industry. write...
- What are the options that might be considered in relation to introducing flexible work practices? What...
- Question 2 : Aggregate Scores: Write a program that opens 2 files, quiz.txt, and hw.txt. The...
- Define the term symbiosis specifically as it applies in a biological context. Compare and contrast parasitism,...
ADVERTISEMENT