Question
In: Accounting
On July 1, 2016, Merideth Industries Inc. issued $43,200,000 of 10-year, 11% bonds at a market...
On July 1, 2016, Merideth Industries Inc. issued $43,200,000 of 10-year, 11% bonds at a market (effective) interest rate of 12%, receiving cash of $40,722,290. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2016.* 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, 2016, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30, 2017, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for 2016. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compute the price of $40,722,290 received for the bonds by using the tables shown in Present Value Tables. (Round to the nearest dollar.) *Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.
Solutions
Expert Solution
| Date | Cash | Interest | Discount | Unamortized | Carrying | |||||
| Interest | Expense | Amortized | Discount | value of Bonds | ||||||
| Dec 31 2016 | 2376000 | 2443337 | 67337 | 2410373 | 40789627 | |||||
| June30 2016 | 2376000 | 2447378 | 71378 | 2338995 | 40861005 | |||||
| Journal Entry: | ||||||||||
| Julu 1 2016 | Cash Account Dr. | 40,722,290 | ||||||||
| Discount on Bonds payable Dr. | 2,477,710 | |||||||||
| Bonds payable | 43,200,000 | |||||||||
| Dec 31 2016 | Interest expense Dr. | 2,443,337 | ||||||||
| cash Account | 2,376,000 | |||||||||
| Discount on bonds payable | 67,337 | |||||||||
| June 30 2017 | Interest expense Dr. | 2447378 | ||||||||
| cash Account | 2376000 | |||||||||
| Discount on bonds payable | 71378 | |||||||||
| When the stated rate of interest is lower than market yield rate, then the bonds will always be issued at discount. | ||||||||||
| This is due to the fact that investor demand the lower price in sacrifice of interest income foregone by them. | ||||||||||
| PRICE OF BONDS | ||||||||||
| Present value of Interest payments made for 20 periods at 6% ($2376,000*Annuity factor i.e. 11.4699) | 27252482.4 | |||||||||
| Present value of maturity amount received after 10 years ($ 43200,000*PVF i.e.0.3118) | 13469760 | |||||||||
| ISSUE PRICE | 40,722,242 | |||||||||
ekkarill92 answered 1 year agoRelated Solutions
On July 1, 2016, Merideth Industries Inc. issued $35,400,000 of 10-year, 10% bonds at a market...
On July 1, 2016, Merideth Industries Inc. issued $35,400,000 of
10-year, 10% bonds at a market (effective) interest rate of 12%,
receiving cash of $31,339,478. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
1.
Journalize the entry to record the amount of cash proceeds from
the issuance of the bonds on July 1, 2016.*
2.
Journalize the entries to record the following:*
a.
The...
On July 1, 20Y1, Danzer Industries Inc. issued $37,400,000 of 10-year, 8% bonds at a market...
On July 1, 20Y1, Danzer Industries Inc. issued $37,400,000 of
10-year, 8% bonds at a market (effective) interest rate of 10%,
receiving cash of $32,739,152. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
1.
Journalize the entry to record the amount of cash proceeds from
the issuance of the bonds on July 1, 20Y1.*
2.
Journalize the entries to record the following:*
a.
The...
On July 1, Year 1, Danzer Industries Inc. issued $26,600,000 of 10-year, 10% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $26,600,000 of
10-year, 10% bonds at a market (effective) interest rate of 11%,
receiving cash of $25,010,623. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
1.
Journalize the entry to record
the amount of cash proceeds from the issuance of the bonds on July
1, Year 1.*
2.
Journalize the entries to
record the following:*...
On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of 20-year, 11% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of
20-year, 11% bonds at a market (effective) interest rate of 14%,
receiving cash of $20,001,500. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
For all journal entries: If an amount box does not require an
entry, leave it blank.
1. Journalize the entry to record the amount of
cash proceeds from the issuance...
On July 1, Year 1, Danzer Industries Inc. issued $68,000,000 of 20-year, 11% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $68,000,000 of
20-year, 11% bonds at a market (effective) interest rate of 14%,
receiving cash of $54,404,080. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
For all journal entries: If an amount box does not require an
entry, leave it blank.
1. Journalize the entry to record the amount of
cash proceeds from the issuance...
On July 1, Year 1, Danzer Industries Inc. issued $1,300,000 of 9-year, 10% bonds at a...
On July 1, Year 1,
Danzer Industries Inc. issued $1,300,000 of 9-year, 10% bonds at a
market (effective) interest rate of 11%, receiving cash of
$1,226,906. Interest on the bonds is payable semiannually on
December 31 and June 30. The fiscal year of the company is the
calendar year.
Required:
1.
Journalize the entry to record the amount of cash proceeds from the
issuance of the bonds on July 1, Year 1. If an amount box does not
require an...
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of
10-year, 7% bonds at a market (effective) interest rate of 8%,
receiving cash of $37,282,062. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
On July 1, Year 1, Danzer Industries Inc. issued $1,900,000 of 10-year, 9% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $1,900,000 of
10-year, 9% bonds at a market (effective) interest rate of 10%,
receiving cash of $1,781,610. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
1. Journalize the entry to record the amount of
cash proceeds from the issuance of the bonds on July 1, Year 1. If
an amount box does not require an...
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of
10-year, 7% bonds at a market (effective) interest rate of 8%,
receiving cash of $37,282,062. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year. Required: 1. Journalize the entry to
record the amount of cash proceeds from the issuance of the bonds
on July 1, Year 1. 2. Journalize the entries to record the
following:*...
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of
10-year, 7% bonds at a market (effective) interest rate of 8%,
receiving cash of $37,282,062. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
1.
Journalize the entry to record
the amount of cash proceeds from the issuance of the bonds on July
1, Year 1.
2.
Journalize the entries to
record the following:*...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- this should be written in Java- Problem: Min/Max Search by Index Develop a program that, given...
- 2.the stock of Business Adventures sells for $70 a share. Its likely dividend payout and end-of-year...
- Provide TWO specific strategies that an equipment designer could employ to reduce heating of the temperature-sensitive...
- For fatty acid synthesis what would be the substrate if you are making an even number...
- Write a javascript program that computes the total cost for a five year car lease. The...
- sara is a 50-year-old woman who lives in a poor village in india. unfortunately, sara’s health...
- What is your opinion on the use of AI technology? Is it necessary or is it...
ADVERTISEMENT