please answer to M14-1 to M14-7

and M14 - 8 to M14 -12

at it g-term debt ($21 million/S3,471 million). These corporate bonds were issued at a discount, given that the book values pro vided are less than the original principal (face values of the bonds Given that fair value of the debt at May 31, 2017, is $3,401 and less than the book value it appears that interest rates have increased, resulting in lower fair values. tor nse MULTIPLE-CHOICE (AICPA ADAPTED) ue Select the best answer for each of the following. M14-1 On January 1, 2019, Bay Company issues bonds 10 14.3 with a face value of $850,000 that puy 9% interest semiannually and mature in 15 years. The market interest rate at the date of issuance is 8%. What is the issue price of the bond? a $850,000.00 - b. $923,491.41 c. 8815,386.52 d. $567,656.32 M14-2 Should legal fees and underwriting costs associ- LO 14.4 ated with issuing bonds be expensed as incurred? C. decreased by accrued interest from June 1 to November 1 d. decreased by accrued interest from May 1 to June 1 M14-5 For the issuer of a 10-year term bond, the amount LO 14.5 of amortization using the effective interest method would increase each year if the bond was sold at a: Discount Premium No No Yes No Yes Legal Fees Underwriting Costs No No M14-6 LO 14.5 - Yes Yes Yes No Yes M14-7 LO 14.6 M14-3 On April 1, 2019, Granville Corporation issued, LO 14.4 at 98 plus accrued interest, 400 of its 10%, $1,000 bonds. The bonds are dated January 1, 2019, and mature on December 31, 2025. Interest is pay- able semiannually on June 30 and December 31. From the bond issuance, Granville would realize net cash receipts of a. $382.000 c. $397,000 b. $392,000 d. $402,000 M14-4 When the interest payment dates of a bond are LO 14.4 May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be a. increased by accrued interest from June 1 to November 1 - b. increased by accrued interest from May 1 to June 1 On January 1, 2019, when the market rate for bond interest was 14%, Lenoir Corporation issued bonds in the face amount of $500,000 with interest at 12% payable semiannually. The bonds mature on December 31, 2026, and were issued at a discount of $53,180. How much of the dis- count should be amortized by the effective inter est method at July 1, 2019 a $1,277 c. S3,191 b. S2,659 d. $3,723 When the issuer of bonds exercises the call pro- vision to retire the bonds, the excess of the cash paid over the carrying amount of the bonds should be recognized separately as an): a. expense b. prior period adjustment c. loss from continuing operations d. loss from discontinued operations When the cash proceeds from a bond issued with detachable stock purchase warrants exceed the sum of the par value of the bonds and the fair M14-8 LO 14.7 Chapter 14 Pancing Lisbe Bande and long le Nos Payable 1452 value of the warrants, the excess should be cred ited to Additional Paid in Capital b. Retained Earnings - Premium on Bonds Payable d. Detachable Stock Warrants Outstanding M14.0 On December 31, 2019, Dare Corporation had LO 14.7 outstanding , 52,000,000 face value convert ible bonds maturing on December 31, 2023 Interest is payable annually on December 31. Each $1,000 bond is convertible into 60 shares of Dare's $10 par value common stock. On January 2, 2021, when the Premium on Bonds Payable account balance was $45,000, an individ ual holding 200 of the bonds exercised the con version privilege when the market value of Dare's common stock was $18 per share. Using the book value method, Dare's entry to record the conver son should include a credit to Additional Paid in Capital of: What is the amount of the gain on the ho redemption? $80,000 gain $240,000 b. $160,000 gaind SO M 11 On January 1, 2019, Onslow Company bore LO 14.8 $360,000 from a major customer evidence non interest-bearing note due in 3 years. Ond agreed to supply the customer's inventory need for the loan period at lower than market price At the 12% imputed interest rate for this type of loan, the present value of the note is $255,000 January 1, 2019. What amount of interes expense should be included in Onslow's 2019 income statement? a. $43,200 c. $30.600 b. $35,000 d. SO M14-12 (Appendix 14.1) Pamlico Company has a LO 14.10 $500,000, 15%, 3-year note dated January 1 2019, payable to Forest National Bank. On December 31, 2020, the bank agreed to settle the note and unpaid interest of $75,000 for $50,000 cash and marketable securities having a current market value of $375,000. Pamlico's acquisi- tion cost of the securities is $385,000. Ignor- ing income taxes, what amount should Pamico report as a gain from the debt restructuring on its 2020 income statement a. S65,000 b. $75,000 c. $140,000 d. $150,000 # $80,000 c. $96,000 .b. 584,500 $125,000 M14-10 On July 1, 2019, Rix Corporation had LO 14.7 $10,000,000 of 9% bonds outstanding. The maturity date is June 30, 2024. Interest is paid semiannually every June 30 and December 31. All the bonds were redeemed on July 1, 2019, at 98. At the time of the bond redemption, there was namortized bond premium of $60,000 and unamortized debt issuance costs of $100.000 REVIEW EXERCISES REIAL On January 1, 2019 Canglon, Inc., issues 10%, 5 year bonds with a face LO 14.3 rate is 12%. Interest is to be paid scmiannull