On April 1, 2021, Bight Corporation issued $400,000, five-year bonds. On this date, Shoreline Corporation purchased the
Question:
On April 1, 2021, Bight Corporation issued $400,000, five-year bonds. On this date, Shoreline Corporation purchased the bonds from Bight to earn interest. Interest is received semi-annually on April 1 and October 1 and Shoreline?s year end is March 31. Below is a partial amortization schedule for the first three interest periods of the bond issue.
Instructions
a. Were the bonds purchased at a discount or at a premium?
b. What is the face value of the bonds?
c. What will the bonds? amortized cost be at the maturity date?
d. What is the bonds? contractual interest rate? The market interest rate?
e. Prepare the journal entries to record the purchase of the bonds; the receipt of interest on October 1, 2021; the accrual of interest on March 31, 2022; and the receipt of interest on April 1, 2022.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
a The carrying amount at April 1 2021 of 418444 is higher than the face or maturity value of 400000 ...View the full answer
Accounting Principles Volume 2
ISBN: 978-1119502555
8th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
