On November 30, 2020, the Frantic Corporation sold 1,000 five-year bonds with each bond having a...

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On November 30, 2020, the Frantic Corporation sold 1,000 five-year bonds with each bond having a $1,000 face value. The bonds had a stated coupon rate of 5% payable annually on November 30. On issuance the market rate that bond purchasers required was 8%. Ignore any tax consequences of the bond retirement. Required: a. Show the journal entries or the corresponding entries using the accounting equation necessary to record the following transactions. (i) The issuance of the bond on November 30, 2020. (ii) (iii) The interest expense and coupon payments on the 5-year bonds on November 30, 2021 and 2022. Assume that the market rate on these bonds had risen to 10% on December 1, 2022 and that the Chief Financial Officer, Ms. Buy, was trying to decide whether to repurchase the bonds. After much discussion with her Treasurer, Mr. Sell, she decided to repurchase all the bonds at the market price (based on the market's 10% required return). b. You are the main shareholder (owner) of Frantic Corporation and are assessing whether Ms. Buy made a good decision. Under what circumstances would retiring the above bonds constitute a good business decision? Explain in no more than 3-4 lines. On November 30, 2020, the Frantic Corporation sold 1,000 five-year bonds with each bond having a $1,000 face value. The bonds had a stated coupon rate of 5% payable annually on November 30. On issuance the market rate that bond purchasers required was 8%. Ignore any tax consequences of the bond retirement. Required: a. Show the journal entries or the corresponding entries using the accounting equation necessary to record the following transactions. (i) The issuance of the bond on November 30, 2020. (ii) (iii) The interest expense and coupon payments on the 5-year bonds on November 30, 2021 and 2022. Assume that the market rate on these bonds had risen to 10% on December 1, 2022 and that the Chief Financial Officer, Ms. Buy, was trying to decide whether to repurchase the bonds. After much discussion with her Treasurer, Mr. Sell, she decided to repurchase all the bonds at the market price (based on the market's 10% required return). b. You are the main shareholder (owner) of Frantic Corporation and are assessing whether Ms. Buy made a good decision. Under what circumstances would retiring the above bonds constitute a good business decision? Explain in no more than 3-4 lines.

Answer rating: 100% (QA)

a Journal entries to record the transactions i Issuance of the bond on November 30 2020 Dr Cash 1000 ... View the full answer