Question

Prime Technology Corp. has the following long-term debt included in its 2018 and 2019 financial statements:...

Prime Technology Corp. has the following long-term debt included in its 2018 and 2019 financial statements:

 $750,000 seven-year, zero-coupon bonds maturing on December 31, 2024. Assume the market rate of interest on the issue date was 8% and that interest is compounded semiannually.

 $1,500,000, 9.5%, ten-year bonds issued on May 31, 2018. Interest is payable November 30 and May 31, beginning on November 30, 2018. Assume an effective interest rate of 8.5%.

Required: Hint: Partial amortization schedules will make this easier to do.

1. Prepare the journal entries for the zero-coupon bonds during 2018 and 2019.

2. Prepare the adjusting entry that should be recorded for the $1,500,000, 9.5% bonds on December 31. 2019.

3. Show what will be reported on the December 31, 2021 balance sheet, income statement, and the indirect statement of cash flows for each bond. Please be sure to show the proper description and classification, along with any associated work, for each item.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Parker Pyrotechnics, Inc. has three bond issues outstanding at 12/31/17: Bond A--$1,000,000, 8% bonds issued on...
Parker Pyrotechnics, Inc. has three bond issues outstanding at 12/31/17: Bond A--$1,000,000, 8% bonds issued on January 1, 2017, due December 31, 2024. Interest is payable June 30 and December 31. Bonds were initially priced to yield 8%. Bond B--$1,000,000, 8% bonds issued on January 1, 2017, due December 31, 2026. Interest is payable June 30 and December 31. Bonds were initially priced to yield 8.5%. Bond C--$1,000,000, 8% bonds issued on February 1, 2017, due January 31, 2022. Interest...
White & Decker Corporation’s 2018 financial statements included the following information in the long-term debt disclosure...
White & Decker Corporation’s 2018 financial statements included the following information in the long-term debt disclosure note: Zero-coupon subordinated debentures, due 2033:   2018 $422 ($ in millions) The disclosure note stated the debenture bonds were issued late in 2013 and have a maturity value of $660 million. The maturity value indicates the amount that White & Decker will pay bondholders in 2033. Each individual bond has a maturity value (face amount) of $1,160. Zero-coupon bonds pay no cash interest during...
Bradley-Link’s December 31, 2018, balance sheet included the following items: Long-Term Liabilities ($ in millions) 7.0%...
Bradley-Link’s December 31, 2018, balance sheet included the following items: Long-Term Liabilities ($ in millions) 7.0% convertible bonds, callable at 102 beginning in 2019, due 2022 (net of unamortized discount of $2) [note 8] $198 11.0% registered bonds callable at 105 beginning in 2028, due 2032 (net of unamortized discount of $1) [note 8] 65 Shareholders’ Equity 5 Equity—stock warrants Note 8: Bonds (in part) The 7.0% bonds were issued in 2005 at 98.0 to yield 10%. Interest is paid...
1. On January 1, 2018, Banno Corporation issued $1,500,000 Face Value of 10% coupon bonds at...
1. On January 1, 2018, Banno Corporation issued $1,500,000 Face Value of 10% coupon bonds at a price of 103, due December 31 2027. Interest on the bonds is payable annually each December 31. The premium on the bond is being amortized on a straight-line basis over the ten years (Straight-line is not materially different in effect from the preferred effective interest method). The bonds are callable at a price of 100 ½ and on January 1, 2024, called all...
Company Corp. has issued long-term debt. The following information pertains to the issuance of this debt...
Company Corp. has issued long-term debt. The following information pertains to the issuance of this debt and necessary journal entries related to this debt. Use an Excel spreadsheet to prepare journal entries and move amounts to the general ledger. 1) The company issues 5-year bonds on 1/1. The face amount of these bonds is $1,000,000 with a coupon rate of 6%. The bonds pay interest semiannually and yield 7%. 2) The company makes adjusting entries on 12/31. Make any adjusting...
Cone Corporation is in the process of preparing its December 31, 2018, balance sheet. There are...
Cone Corporation is in the process of preparing its December 31, 2018, balance sheet. There are some questions as to the proper classification of the following items: a. $57,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2022. b. Prepaid rent of $31,000, covering the period January 1, 2019, through December 31, 2020. c. Note payable of $214,000. The note is payable in annual installments of $27,000 each, with the first installment payable...
The balance sheet at December 31, 2018, for Nevada Harvester Corporation includes the liabilities listed below:...
The balance sheet at December 31, 2018, for Nevada Harvester Corporation includes the liabilities listed below: a. 10% bonds with a face amount of $42 million were issued for $42 million on October 31, 2009. The bonds mature on October 31, 2029. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2019, at a redemption price of $42 million. Market conditions are such that the call is not expected to be exercised. b. Management intended...
Technologies Limited (ATL) is preparing its Statement of Financial Position (SFP) as at December 31, 2020....
Technologies Limited (ATL) is preparing its Statement of Financial Position (SFP) as at December 31, 2020. The following items are under consideration. Rent received in advance for the first quarter of 2021, $20,000. $400,000 bonds payable bearing interest at 8% per annum, maturing December 31 2024. The unamortized balance of the premium was $10,000 at the end of 2020. Management’s valuation of internally generated goodwill, $74,000. Long-term note payable, $250,000, issued on June 30, 2017 and maturing June 30, 2021....
Pronghorn Corp.’s statement of financial position at the end of 2019 included the following items: Current...
Pronghorn Corp.’s statement of financial position at the end of 2019 included the following items: Current assets $1,275,000 Current liabilities $994,200 Land 30,700 Bonds payable 1,281,000 Buildings 1,150,000 Common shares 192,000 Equipment 322,000 Retained earnings 189,000 Accumulated depreciation—buildings (149,000 ) Accumulated depreciation—equipment (12,600 ) Intangible assets—patents 40,100 Total $2,656,200 Total $2,656,200 The following information is available for the 2020 fiscal year: 1. Net income was $398,000. Interest paid is classified as operating activities. 2. Equipment (cost of $21,200 and accumulated...
QUESTION 4 (20 Marks) Extracts of the financial statements of Prestige Limited for 2019 are given...
QUESTION 4 Extracts of the financial statements of Prestige Limited for 2019 are given below. REQUIRED 4.1 Calculate the following ratios for 2019. Where applicable, round off answers to two decimal places. 4.1.1 Gross profit margin 4.1.2 Net profit margin 4.1.3 Return on equity 4.1.4 Dividends per share 4.1.5 Acid test ratio 4.1.6 Debt-equity ratio 4.1.7 Finance cost coverage 4.2 Comment on the following ratios: 2019 2018 4.2.1 Inventory turnover 7.5 times 9.5 times 4.2.2 Average collection period 40.50 days...