Question
Figaro Company had the following information regarding a five-year bond that it issued on January 1, 2019. Cash Interest Amount Carrying Paid Expense Amortized Value
Figaro Company had the following information regarding a five-year bond that it issued on January 1, 2019.
|
|
| Cash |
| Interest |
| Amount |
| Carrying |
|
|
|
| Paid |
| Expense |
| Amortized |
| Value |
|
|
| Date | 3% |
| 4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1/1/19 |
|
|
|
|
|
| $643,249 |
|
|
| 7/1/19 | $21,000 |
| $25,729.96 |
| $4,729.96 |
| $647,978.86 |
|
|
| 1/1/20 | $21,000 |
| $25,919.15 |
| $4,919.15 |
| $652,898.01 |
|
|
| 7/1/20 | $21,000 |
| $26,115.92 |
| $5,115.92 |
| $658,013.93 |
|
|
| 1/1/21 | $21,000 |
| $26,320.56 |
| $5,320.56 |
| $663,334.49 |
|
|
| 7/1/21 | $21,000 |
| $26,533.38 |
| $5,533.38 |
| $668,867.87 |
|
|
| 1/1/22 | $21,000 |
| $26,754.71 |
| $5,754.71 |
| $674,622.58 |
|
|
| 7/1/22 | $21,000 |
| $26,984.90 |
| $5,984.90 |
| $680,607.49 |
|
|
| 1/1/23 | $21,000 |
| $27,224.30 |
| $6,224.30 |
| $686,831.78 |
|
|
| 7/1/23 | $21,000 |
| $27,473.27 |
| $6,473.27 |
| $693,305.06 |
|
|
| 1/1/24 | $21,000 |
| $27,732.20 |
| $6,732.20 |
| $700,037.26 |
|
Required:
- What is the coupon (face) rate of the bond?
- What is the effective interest rate of the bond?
- Was the bond issued at a premium, discount or par? How did you determine your answer?
- How much total interest expense will Figaro report on this bond in the year 2021?
- On what financial statement would Figaro report the interest expense?
- How will Figaro report the bond on their 2021 Balance Sheet? Be specific.
- What is the maturity value of the bond?
- Assume that, on January 1, 2022, Figaro pays $686,000 to retire the bond. What is the gain or loss on redemption? Be sure to show your calculations and specify whether there was a gain or a loss.
- Prepare a financial statement effects template or journal entries showing:
- The issuance of the bond
- The payment of interest on July 1, 2021
- The redemption of the bond on January 1, 2022.
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Accounting Ethics Education Making Ethics Real
Authors: Alberto J. Costa, Margarida M. Pinheiro
1st Edition
1032019999, 9781032019994
