Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC Inc. had a new plant constructed having 10-year life and zero salvage value.In order to raise the funds required for the project, the company

ABC Inc. had a new plant constructed having 10-year life and zero salvage value.In order to raise the funds required for the project, the company issued 10-year 8% $1,000 bonds in the market with a total face value of $13,560,000.The market rate was 5% and interest was payable on June 30 and December 31.The plant was funded from the proceeds obtained by issuing the bonds.ABC Inc. uses IFRS for financial reporting purposes.

Required:Use this information to answer Questions (i) - (iv) below.

i]Determine the issue price of the bonds.Prepare the journal entries, in proper format, required on January 1, 2016 to record the issue of the bonds.Show your work in detail.

ii]Prepare the journal entries, in proper format, required on December 31, 2018, to record the interest on the bond issue.

Iii] Determine the amounts of the bond payable outstanding on December 31, 2016 and show, in good format, how it will be reported.

Now, assume that on January 1, 2019, ABC Inc. retires 30% of the bonds payable.The bond holders agree to accept, instead of cash, 20 common shares in exchange for each $1,000 bond.The shares of ABC Inc. were being traded on that date at $65 per share.There is no interest due on the bonds as all interest was already recorded/paid on December 31, 2018.

iv] Prepare the journal entry as at January 1, 2019, to record this transaction as per IFRS requirements.

HINT:It would be helpful to have a bond amortization table.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Forensic Accounting

Authors: Michael A Crain, William S Hopwood,

1st Edition

1941651100, 978-1941651100

More Books

Students also viewed these Accounting questions

Question

5. Give examples of binary thinking.

Answered: 1 week ago