Question
In: Accounting
On January 1, 2014, GLOBAL FINANCIAL INV. Holding has issued bonds which were having OMR 400,000...
On January 1, 2014, GLOBAL FINANCIAL INV. Holding has issued bonds which were having OMR 400,000 as par value but they were issued for 93. It was evident from the records that the due date for such bonds was in 2024.
Considering the fact of Market rate in mind, GLOBAL FINANCIAL INV. Holding takes a hard decision to call its bonds back on 1stJanuary 2019 and then cancel them at 101.
Annual interest which was paid by the GLOBAL FINANCIAL INV. Holding is 8% and it has been observed that the amortization of the discount was done using reducing balance method.
a) Calculate the amount of Amortized and un-Amortized discount.
b) Pass journal entries from January 1, 2014 to January 1, 2019
Solutions
Expert Solution
| a) Amortization shedule as given below: | ||||||
| Total Discount to be amortised (4,00,000*(100%-93%) = 28,000 OMR | ||||||
| Amortization amount each year from 2014 to 2024(begning) (28,000/10) = OMR 2,800 | ||||||
| Unamortised Discount Balance as on 01/01/2019 (28000-(2800*5))= OMR 14,000 | ||||||
| b) Journal Entry | ||||||
| 2014 | Bank A/c ………………………Dr | 372000 | ||||
| Dis. On Bond A/c …………Dr | 28000 | |||||
| To Bond Payable A/c | 400000 | |||||
| 2014 | ||||||
| to | Amortization Exp/ A/c …..Dr | 2,800 | ||||
| 2018 | To Dis. On Bond A/c | 2,800 | ||||
| 2014 | Interest Exp. A/c…………..Dr | |||||
| to | To Bank A/c | |||||
| 2018 | ||||||
| 2019 | Bond Payable A/c …………Dr | 400000 | ||||
| Dis. On Bond A/c…………..Dr | 4000 | |||||
| To Bank | 404000 | |||||
ekkarill92 answered 2 years agoRelated Solutions
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Part 1: On January 1 2018, Louis Company issued bonds with a Par Value of $400,000....
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On January 1 2018, Louis Company issued bonds with a Par Value
of $400,000. The coupon interest rate on the bond is 10%, and it
has a maturity of 3 years.
Interest is paid semiannually on June
30th and December 31 of each year.
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Compute the value of the bond assuming the following market
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[5 points]
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_____________________________________
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