Tron Corp. was authorized to issue $500,000 of face value bonds, as follows: Date of Interest...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Tron Corp. was authorized to issue $500,000 of face value bonds, as follows: Date of Interest rate authorization January 1, 2020 12% Term 3 years Interest payment dates Semi-annually on June 30 and December 31 The corporation issued $250,000 of bonds on January 1, 2020 Required: Answer the questions for each of these independent cases. Case A: the bonds are issued at face value. Case B: the bonds are issued for $256,000. Case C: the bonds are issued for $242,800. 1. Calculate a. the amount of interest paid on the issued bonds every interest payment date; b. the amount of amortization, if any, applicable to each interest payment date (use the straight-line method of amortization). 2. Prepare journal entries to record a. the issue of the bonds; b. the payment of interest and recording of amortization, if any, on June 30, 2020; c. the payment of interest and recording of amortization, if any, on December 31, 2020. 3. Calculate the amount of interest expense shown in the income statement at December 31, 2020. Is this amount the same as cash paid by Tron in 2020? Why or why not? 4. On December 31, 2020, the corporation exercised a call feature included in the bond indenture and retired the $250,000 of face value bonds issued January 1, 2020. The bonds were called at 103. Prepare the December 31 journal entry to record the exercise of the call option. Assume interest and amortization journal entries have been recorded. 1a interest payment every six months 1b Calculate amount of amortization to be recorded at each interest payment date Issue price Less Face value = Premium (Discount) Divided by number of payment 3 years twice a year Amortization for each 6 month period 3 Income Statement Interest Expense Calculation Cash Interest paid during year Discount(Premium) Amortization 2020 1-Jan Case A-the bonds are issued at face value 4 Retirement at 103 calculation Face value 30-Jun Face amount of bond stated rate *6/12 31-Dec 31-Decl Income Statement Interest Expense remaining unamortized Premium (Discount) Carrying Amount Less Cash paid face call Gain (Loss) on retirement Case A the bonds are issued at face value Debit Credit 1a interest payment every six months Case B-the bonds are issued at premium 1b Calculate amount of amortization to be recorded at each interest payment date Issue price Less Face value Face amount of bond stated rate 6/12 3 Income Statement Interest Expense Calculation Cash Interest paid during year Discount(Premium) Amortization 30-Jun 31-Dec = Premium (Discount) Divided by number of payment 3 years twice a year Amortization for each 6 month period 4 Retirement at 103 calculation Face value remaining unamortized Premium (Discount) Carrying Amount Less Cash paid face call 31-Dec Income Statement Interest Expense 2 Case B-the bonds are issued at premium 2020 1-Jan Gain (Loss) on retirement Debit Credit 1a interest payment every six months Case C-the bonds are issued at discount 1b Calculate amount of amortization to be recorded at each interest payment date Issue price Less Face value Face amount of bond stated rate 6/12 3 Income Statement interest Expense Calculation Cash Interest paid during year Discount(Premium) Amortization 30-Jun 31-Dec Premium (Discount) Divided by number of payment-3 years twice a year Amortization for each 6 month period 4 Retirement at 103 calculation Face value remaining unamortized Premium (Discount) Carrying Amount Less Cash paid face call. 31-Dec Income Statement Interest Expense 2 Case C-the bonds are issued at discount 2020 1-Jan Gain (Loss) on retirement Debit Credit Tron Corp. was authorized to issue $500,000 of face value bonds, as follows: Date of Interest rate authorization January 1, 2020 12% Term 3 years Interest payment dates Semi-annually on June 30 and December 31 The corporation issued $250,000 of bonds on January 1, 2020 Required: Answer the questions for each of these independent cases. Case A: the bonds are issued at face value. Case B: the bonds are issued for $256,000. Case C: the bonds are issued for $242,800. 1. Calculate a. the amount of interest paid on the issued bonds every interest payment date; b. the amount of amortization, if any, applicable to each interest payment date (use the straight-line method of amortization). 2. Prepare journal entries to record a. the issue of the bonds; b. the payment of interest and recording of amortization, if any, on June 30, 2020; c. the payment of interest and recording of amortization, if any, on December 31, 2020. 3. Calculate the amount of interest expense shown in the income statement at December 31, 2020. Is this amount the same as cash paid by Tron in 2020? Why or why not? 4. On December 31, 2020, the corporation exercised a call feature included in the bond indenture and retired the $250,000 of face value bonds issued January 1, 2020. The bonds were called at 103. Prepare the December 31 journal entry to record the exercise of the call option. Assume interest and amortization journal entries have been recorded. 1a interest payment every six months 1b Calculate amount of amortization to be recorded at each interest payment date Issue price Less Face value = Premium (Discount) Divided by number of payment 3 years twice a year Amortization for each 6 month period 3 Income Statement Interest Expense Calculation Cash Interest paid during year Discount(Premium) Amortization 2020 1-Jan Case A-the bonds are issued at face value 4 Retirement at 103 calculation Face value 30-Jun Face amount of bond stated rate *6/12 31-Dec 31-Decl Income Statement Interest Expense remaining unamortized Premium (Discount) Carrying Amount Less Cash paid face call Gain (Loss) on retirement Case A the bonds are issued at face value Debit Credit 1a interest payment every six months Case B-the bonds are issued at premium 1b Calculate amount of amortization to be recorded at each interest payment date Issue price Less Face value Face amount of bond stated rate 6/12 3 Income Statement Interest Expense Calculation Cash Interest paid during year Discount(Premium) Amortization 30-Jun 31-Dec = Premium (Discount) Divided by number of payment 3 years twice a year Amortization for each 6 month period 4 Retirement at 103 calculation Face value remaining unamortized Premium (Discount) Carrying Amount Less Cash paid face call 31-Dec Income Statement Interest Expense 2 Case B-the bonds are issued at premium 2020 1-Jan Gain (Loss) on retirement Debit Credit 1a interest payment every six months Case C-the bonds are issued at discount 1b Calculate amount of amortization to be recorded at each interest payment date Issue price Less Face value Face amount of bond stated rate 6/12 3 Income Statement interest Expense Calculation Cash Interest paid during year Discount(Premium) Amortization 30-Jun 31-Dec Premium (Discount) Divided by number of payment-3 years twice a year Amortization for each 6 month period 4 Retirement at 103 calculation Face value remaining unamortized Premium (Discount) Carrying Amount Less Cash paid face call. 31-Dec Income Statement Interest Expense 2 Case C-the bonds are issued at discount 2020 1-Jan Gain (Loss) on retirement Debit Credit
Expert Answer:
Related Book For
Marketing Research
ISBN: 978-0134167404
8th edition
Authors: Alvin C. Burns, Ann F. Veeck, Ronald F. Bush
Posted Date:
Students also viewed these accounting questions
-
0 Construct a PERT network. [NOTE: This is the most crucial part of the exercise. Make sure you have the correct network before proceeding to the next sections] 2) CLEARLY SHOW ALL TIMES IN THE...
-
Which hydrogen is most acidic? OHE A. A B. B and C C.D and E D. E HB H OHD HA O:
-
Goal To understand and calculate the deductions of your bi-weekly paycheck. Role You have just received your first part-time job and want to begin to budget you finances. There are many deductions...
-
Prove the following statement: If a transformer having a series impedance Ze is connected as an autotransformer, its per-unit series impedance Z as an autotransformer will be SE Zoq NSE + NC Note...
-
Explain how back-to-back loans can hedge foreign exchange operating exposure.
-
Find an equation for (a) The vertical line and (b) The horizontal line through the given point. (0, -2)
-
Rebecca Pons owns Pons Magic Makers Manufacturing. She is contemplating the purchase of a machine that would be used to manufacture various products that would be sold to magic shops. The following...
-
The following data were taken from the records of Stellar Manufacturing Company for the fiscal year ended June 30, 2010. Instructions(a) Prepare a cost of goods manufactured schedule. (Assume all raw...
-
What is the present value? What is the value in 3 years?. points Part 1 of 2 (X Points: 0 of 1 Save You have just received a windfall from an investment you made in a friend's business. He will be...
-
Using a computer spreadsheet, set up a cash flow statement to capture the anticipated cash flow in the following case study scenario. Cash Flow Planning Exercise This exercise is an opportunity to...
-
Question 1 (16 points) The aggregate production function in the Romer model describes how the capital stock, K, and labor, Ly, combine to produce output, Y, using the stock of ideas, A: YK" (ALy) (1)...
-
Assuming a coefficient of sliding friction of 0.6, an overburden stress of 11000 psi, a pore pressure of 4400 psi, what is the lower bound of the minimum horizontal stress? Enter in your values in...
-
Building and construction projects must comply with environmental requirements. Identify the legislation that relates to the environmental Acts for New South Wales.
-
Crestwood Ltd., a computer hardware company with sales of $28 million and a net profit margin of 6.5% is considering an expansion. Management estimates the expansion would result in sales growth of...
-
What is the A ) total dollar spent by all customers B ) the average dollar spent per customer, C ) the largest ( max ) and D ) smallest ( min ) amounts spent by any customer? Repeat for number of...
-
A hollow power transmission shaft of outer diameter 60 mm and inner diameter 30 mm is 3 m in length. The shaft is required to transmit a power of 200 kW at a speed of1280 rpm( Reference Table (1.1))...
-
Controllable costs for responsibility accounting purposes are those costs that are directly influenced by: a given manager within a given period of time. a change in activity. production volume....
-
Why is inventory management important for merchandising and manufacturing firms and what are the main tradeoffs for firms in managing their inventory?
-
1. For each client's survey, take each of the nine data collection methods identified in this chapter and specify what you think is the strongest and weakest aspects of using that data collection...
-
Describe the classifications of secondary data?
-
Explain why it is important for marketing researchers to be knowledgeable of research design.
-
Which statement is false? a. In terms of actual numbers of events, women commit more fraud than men. b. Fraudsters act alone about 70 percent of the time. c. Employees are the largest number of...
-
Which statement is false? a. Women are more likely than men to report fraudulent activity. b. Older employees are more likely to report fraudulent activities than younger employees. c. For each \(\$...
-
What would be the worst strategy to catch ghost employees? a. Insure segregation of payroll preparation, disbursement, and distribution functions. b. Check for inflated invoices. c. Examine payroll...
Study smarter with the SolutionInn App