Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2014, Bills Sock Co issued $100,000 worth of bonds. The bonds carry 12% interest due each January 1, and mature on January

  1. On January 1, 2014, Bills Sock Co issued $100,000 worth of bonds. The bonds carry 12% interest due each January 1, and mature on January 1, 2024. The market rate of interest was 13%.
    1. Would the bonds be issued at par, a discount or a premium? _________________
    2. Why? ____________________________________________________________
    3. What is the bonds cash interest payment every year? ______________________
    4. What is the amount of money that will be repaid in 2024? ___________________
    5. Compute the bonds issuance price using the PV of all the bond payment streams, discounted at ____% rate over _______ years. ____________________________

____________________________________________________________________________________________________________________________________

  1. What are the B/S entries for the bond issuance on Jan 1, 2014?

Balance Sheet

  1. What is the cash interest payment and interest expense for the bond in 2014 using the formulas below?

Cash interest payment = Principal x Coupon rate x Time

Interest expense = Carrying value Effective rate Time

Amortization of discount = Interest expense Cash interest payment

Cash interest payment: _______________________________________________

Interest expense: ____________________________________________________

Amortization of discount: ____________________________________________

  1. What are the B/S and I/S entries on Dec 31, 2014? Ignore the impact of taxes.

Balance Sheet

Income Statement

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

Activity Accounting An Activity-Based Costing Approach

Authors: James A. Brimson

1st Edition

0471196282, 978-0471196280

More Books

Students also viewed these Accounting questions

Question

Whether training would be needed, and what methods would be used.

Answered: 1 week ago

Question

What should be the purpose of performance management and appraisal?

Answered: 1 week ago

Question

The issue of staff sensitivity to feedback

Answered: 1 week ago