Question

On January 1, 2017, FNB bank issued 8 %, 5-year bonds with a face amount of...

On January 1, 2017, FNB bank issued 8 %, 5-year bonds with a face amount of K750, 000 to SNCC COMPANY Interest is payable annually at the beginning of the year. The bond is issued for an effective interest rate of 10%.

Required a) Calculate the value of the bond and prepare the entries to record the issuance of the bonds in the books of FNB

b) Prepare the entries to record the first annual interest accrual and the payment assuming that the company uses effective-interest amortization.

c) At the end of year 3 FNB decided to buy back this bond at a cost of K600, 000. Calculate the gain on loss on this transaction and show the double entry also advice if the bond should be bought back

d)In addition to the purchase price SNCC paid the broker K 30,000 to facilitate the purchase of this bond.Show how this bond will be recorded in the books of Puma

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
On January? 31, 20142014?, DurkinDurkin ?Logistics, Inc., issued tenten?-year, 77?% bonds payable with a face value...
On January? 31, 20142014?, DurkinDurkin ?Logistics, Inc., issued tenten?-year, 77?% bonds payable with a face value of $ 5 comma 000 comma 000$5,000,000. The bonds were issued at 9898 and pay interest on January 31 and July 31. DurkinDurkin ?Logistics, Inc., amortizes bond discount by the?straight-line method. Requirement 1. Record? (a) issuance of the bonds on January? 31, (b) the semiannual interest payment and amortization of bond discount on July? 31, and? (c) the interest accrual and discount amortization on...
Culver Company issued $396,000 of 10%, 20-year bonds on January 1, 2017, at 102. Interest is...
Culver Company issued $396,000 of 10%, 20-year bonds on January 1, 2017, at 102. Interest is payable semiannually on July 1 and January 1. Culver Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account...
Teal Company issued $ 576,000 of  10%,  20-year bonds on January 1, 2017, at  102. Interest is payable semiannually...
Teal Company issued $ 576,000 of  10%,  20-year bonds on January 1, 2017, at  102. Interest is payable semiannually on July 1 and January 1. Teal Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of  9.7705%. Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter...
Sheridan Company issued $501,000, 8%, 30-year bonds on January 1, 2022, at 102. Interest is payable...
Sheridan Company issued $501,000, 8%, 30-year bonds on January 1, 2022, at 102. Interest is payable annually on January 1. Sheridan uses straight-line amortization for bond premium or discount. Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The accrual of interest and the premium amortization on December 31, 2022. (c) The payment of interest on January 1, 2023....
On January 1, 2017, Tamarisk Inc. issued $490,000 of 6%, 5-year bonds at par. Interest is...
On January 1, 2017, Tamarisk Inc. issued $490,000 of 6%, 5-year bonds at par. Interest is payable semiannually on July 1 and January 1. Prepare journal entries to record the following. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) (a) The issuance of the bonds....
January 1, 2014, issued $400,000 of 7.5%, 10-year bonds were issued at 97. - Issuance of...
January 1, 2014, issued $400,000 of 7.5%, 10-year bonds were issued at 97. - Issuance of 7.5% bonds on Jan 1 2014 - Accrual of bond interest and recognition of amortization on December 31 2014. Instructions: Prepare journal entries for above and entries to show the early retirement on January 1, 2016 at 102. Bond discount had a $9,600 balance on January 1, 2016.
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010,...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010, a yield of 12%. Novak uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions: 1.) The issuance of bonds on June 30, 2017. 2.) The payment of interest and the amortization of the premium on December 31, 2017. 3.) The payment of interest...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010,...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010, a yield of 12%. Novak uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions: (1) The issuance of the bonds on June 30, 2017. (2) The payment of interest and the amortization of the premium on December 31, 2017. (3) The payment of...
Lorance Corporation issued $845,000, 9%, 10-year bonds on January 1, 2015, for $792,347. This price resulted...
Lorance Corporation issued $845,000, 9%, 10-year bonds on January 1, 2015, for $792,347. This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. Lorance uses the effective-interest method to amortize bond premium or discount. 1)Prepare the journal entry to record the issuance of the bonds. 2)Prepare the journal entry to record the payment of interest and the discount amortization on July 1, 2015, assuming that interest was not...
Presto Company issued $240,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable...
Presto Company issued $240,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable semiannually on July 1 and January 1. Presto uses straight-line amortization for bond premium or discount. Interest is not accrued on June 30. Instructions: Prepare the journal entries to record the following. a. The issuance of the bonds. b. The payment of interest and the premium amortization on July 1, 2012. c. The accrual of interest and the premium amortization on December 31, 2012....