Question
In: Accounting
On January 1, 20X5, Hillside Inc. bought $3,750,000 of five-year, 8% Straight Arrow bonds. The bonds...
On January 1, 20X5, Hillside Inc. bought $3,750,000 of five-year, 8% Straight Arrow bonds. The bonds pay interest annually on December 31. When Hillside bought the bonds, the market rate of interest was 7% and the company classified the bond investment as FVOCI.
Market value information on the bonds:
Date Market value
December 31, 20X5 $3,900,000
December 31, 20X6 3,800,000
December 31, 20X7 3,850,000
December 31, 20X8 3,650,000
December 31, 20X9 3,750,000
What is the balance in the reserves account — accumulated other comprehensive income (AOCI) — at December 31, 20X6, that is associated with these bonds?
a) $22,980 CR
b) $48,411 DR
c) $71,391 DR
d) $94,371 DR
Solutions
Expert Solution
AOCI represents difference between fair value and amortized price of bonds.
| Particulars | Cash flow | Discount factor | Discounted cash flow |
| present value Interest payments-Annuity (7%,3 periods) | $ 300,000.00 | 2.62432 | $ 787,294.81 |
| Present value of bond face amount -Present value (7%,3 periods) | $ 3,750,000.00 | 0.81630 | $ 3,061,117.04 |
| Bond price | $ 3,848,411.85 | ||
| Less: fair value | $ (3,800,000.00) | ||
| Premium/(Discount) | $ 48,411.85 | ||
| Interest amount: | |||
| Face value | 3,750,000 | ||
| Coupon/stated Rate of interest | 8.000% | ||
| Frequency of payment(once in) | 12 months | ||
| Interest amount | 3750000*0.08*12/12= | $ 300,000.00 |
Answer is $48,411.85 DR
ekkarill92 answered 2 years agoRelated Solutions
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2017, that pay interest semiannually on...
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1,
2017, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $1,468,794.
Required:
1. Prepare the January 1, 2017, journal entry
to record the bonds’ issuance.
2(a) For each semiannual period, complete the
table below to calculate the cash payment.
2(b) For each semiannual period, complete the
table below to calculate the straight-line premium
amortization.
2(c) For each semiannual period, complete the...
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2017, that pay interest semiannually on...
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1,
2017, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $1,468,794.
Required:
1. Prepare the January 1, 2017, journal entry
to record the bonds’ issuance.
2(a) For each semiannual period, complete the
table below to calculate the cash payment.
2(b) For each semiannual period, complete the
table below to calculate the straight-line premium
amortization.
2(c) For each semiannual period, complete the...
On January 1, 2023, Day Co. paid $92,278 for $100,000 faceamount, five-year, 8% bonds, a...
On January 1, 2023, Day Co. paid $92,278 for $100,000 face
amount, five-year, 8% bonds, a price that yields 10%. Interest is
payable every July 1 and January 1. Total Interest Revenue to be
recorded over the life of the bond is:Select one:a. $32,278b. $87,722c. $47,722d. $40,000e. $7,722
The Company sold $2,500,000 of 8 percent, five-year bonds on January 1, 2011, and would pay...
The Company sold $2,500,000 of 8 percent, five-year bonds on
January 1, 2011, and would pay interest semiannually, on June 30
and December 31 of each of the five years. It sold the bonds on
January 1, 2011, at 96 because the market rate of interest for
similar investments was 9 percent. It decided to amortize the bond
discount by using the effective interest method.
15. With regard to the bond issue on January 1, 2011, how much
cash is...
Hillside issues $4,000,000, 6%, 15-year bonds dated January 1, 2017. The bonds pay interest semi-annually on...
Hillside issues $4,000,000, 6%, 15-year bonds dated January 1,
2017. The bonds pay interest semi-annually on June 30 and December
31. The bonds were issued at $3,456,448. 1. Record the journal
entry to issue the bonds on January 1, 2017. 2. a. Record the
journal entry to pay the semi-annual interest payment and amortize
the discount on June 30, 2017. b. Record the journal entry to pay
the semi-annual interest payment and amortize the discount on Dec.
31, 2017. 3....
Hillside issues $4,000,000 of 6%, 15-year bonds dated January 1, 2017, that pay interest semiannually on...
Hillside issues $4,000,000 of 6%, 15-year bonds dated January 1,
2017, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $3,456,448.
Required
1. Prepare January 1, 2017, journal entry to record the bonds’
issuance.
2. For each semiannual period, compute (a) the cash payment, (b)
the straight-line discount amortization, and (c) the bond interest
expense.
3. Determine the total bond interest expense to be recognized
over the bonds’ life.
4. Prepare...
Hillside issues $1,500,000 of 6%, 15-year bonds dated January 1, 2019, that pay interest semiannually on...
Hillside issues $1,500,000 of 6%, 15-year bonds dated January 1,
2019, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $1,296,168. Required: 1. Prepare
the January 1 journal entry to record the bonds’ issuance. 2(a) For
each semiannual period, complete the table below to calculate the
cash payment. 2(b) For each semiannual period, complete the table
below to calculate the straight-line discount amortization. 2(c)
For each semiannual period, complete the table...
Hillside issues $2,700,000 of 7%, 15-year bonds dated January 1, 2019, that pay interest semiannually on...
Hillside issues $2,700,000 of 7%, 15-year bonds dated January 1,
2019, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $2,333,101. Required: 1. Prepare
the January 1 journal entry to record the bonds’ issuance. 2(a) For
each semiannual period, complete the table below to calculate the
cash payment. 2(b) For each semiannual period, complete the table
below to calculate the straight-line discount amortization. 2(c)
For each semiannual period, complete the table...
Hillside issues $1,600,000 of 9%, 15-year bonds dated January 1, 2017, that pay interest semiannually on...
Hillside issues $1,600,000 of 9%, 15-year bonds dated January 1,
2017, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $1,958,394.
Required:
1. Prepare the January 1, 2017, journal entry
to record the bonds’ issuance.
2(a) For each semiannual period, complete the
table below to calculate the cash payment.
2(b) For each semiannual period, complete the
table below to calculate the straight-line premium
amortization.
2(c) For each semiannual period, complete the...
Hillside issues $1,000,000 of 6%, 15-year bonds dated January 1, 2017, that pay interest semiannually on...
Hillside issues $1,000,000 of 6%, 15-year bonds dated January 1,
2017, that pay interest semiannually on June 30 and December 31.
The bonds are issued at a price of $1,223,995.
Required:
1. Prepare the January 1, 2017, journal entry
to record the bonds’ issuance.
2(a) For each semiannual period, complete the
table below to calculate the cash payment.
2(b) For each semiannual period, complete the
table below to calculate the straight-line premium
amortization.
2(c) For each semiannual period, complete the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- What is the difference among the principles of modularization, abstraction, encapsulation, and separation of interface and...
- An investment project costs $20,100 and has annual cash flows of $4,400 for six years. ...
- PUT IN JAVA PROGRAMMING The StockB class: Design a class named StockB that contains the following...
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
- Many people keep time using a 24 hour clock (11 is 11am and 23 is 11pm,...
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
ADVERTISEMENT