Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

could you please answer the part e, f, g . Thanks in Advance. A) Present value of bond - Face Value = $300,000 Coupon Payment

could you please answer the part e, f, g . Thanks in Advance. image text in transcribed

A) Present value of bond -

Face Value = $300,000 Coupon Payment = $22,500 ($300,000*7.5%) Rate = 8% Period = 10

Present value of Bond = 22500(PVFIA 8%, 10) +300,000(PVIF 8%, 10) Present Value of Bonds = $289,934.88

B) Bond Amortization table -

Date

Payment in Cash

Effective Interest Expense = Carrying Amount x 8%

Discount Amortized = Int. exp - Cash paid

Carrying Amount of Bonds = Previous bal + Discount amortized

1-Jan-15

$289,934.88

31-Dec-15

$ 22,500

$23,194.79

$694.79

$290,629.67

31-Dec-16

$ 22,500

$23,250.37

$750.37

$291,380.04

31-Dec-17

$ 22,500

$23,310.40

$810.40

$292,190.44

31-Dec-18

$ 22,500

$23,375.24

$875.24

$293,065.68

C) Journal Entry to record the bond issue on June 1, 2015

Face Value = $300,000 Coupon Payment = $22,500 ($300,000*7.5%) Rate = 8% Period = 9,5

Present value of Bond = 22500(PVFIA 8%, 9.5) +300,000(PVIF 8%, 9.5) Present Value of Bond = $290,275.59

Dr.

Cr.

Cash

$ 290,276

Discount on Bonds Payable

$ 9,724

Bonds Payable

$ 300,000

D) Adjusting Entry -

Dr.

Cr.

Interest Expenses ($23,310.40 x 9/12)

$ 17,482.80

Discount on Bonds Payable (810.40 x 9/12)

$ 607.80

Interest Payable

$ 16,875.00

(Interest Accrued on Sept 30, 2017)

Terra Company issued a $300,000, 7.50%, 10-year bond on June 1, 2015. Additional information on the bond follows: Bond Date: January 1, 2015 Maturity Date: December 31, 2024 Yield (Market) Rate: 8% Interest Payment Date: Interest is paid annually on December 31 of each year Terra's year end: September 30 Required: Round calculations to the nearest dollar a) Calculate the present value of the bond assuming that it had been issued on January 1, 2015. Show calculations/keystrokes. (1 mark) b) Prepare a bond amortization table from January 1, 2015 until December 31, 2018. Show each annual interest payment. (3 marks) c) Calculate the total amount of cash received by Terra on June 1, 2015, reflecting the fact the bond was issued on June 1, 2015. Make the journal entry to record the bond issue on June 1, 2015. (4 marks) d) Prepare the adjusting entry required at Terra's year end, Sept 30, 2017. (2 marks) e) Prepare the journal entry on Terra's books to make the December 31, 2017 interest payment to its investors. (2 marks) A) On July 1, 2018, Terra Company decides to retire 20% of the bonds at 98 plus accrued interest. Make the entry to record interest up to July 1 including interest payable interest will be paid when the bond is retired in part (ii) below) (3 marks) (ii) Make the entry to retire the bonds. (5 marks) g) Make the entry on Terra's books on December 31, 2018 to pay out interest to the remaining bondholders

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

Step: 3

blur-text-image

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

Blockchain Techonology In Accounting And Auditing

Authors: Prof Oleksandr Melnychenko

1st Edition

1976900328, 978-1976900327

More Books

Students also viewed these Accounting questions

Question

What does it mean for two variables to correlate with each other?

Answered: 1 week ago

Question

5. Have you stressed the topics relevance to your audience?

Answered: 1 week ago