Question

On January 1, Coronado Industries issued $5600000, 11% bonds for $5964000. The market rate of interest...

On January 1, Coronado Industries issued $5600000, 11% bonds for $5964000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Coronado uses the effective-interest method of amortizing bond premium. At the end of the first year, Coronado should report unamortized bond premium of:

* $345660

* $322400

* $344400

* $308000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Calculate premium on bonds payable.

Issue price of the bonds = $5,964,000

Face value of the bonds = $5,600,000

Therefore,

Premium on bonds payable = Issue price - Face value = $5,964,000 - $5,600,000 = $364,000

Calculate premium to be amortized for the first year.

Cash interest paid annually on the bonds = Face value x Stated interest rate = $5,600,000 x $11% = $616,000

Interest expense to be recorded for the first year = Issue price x market interest rate = $5,964,000 x 10% = $596,400

Therefore,

Premium to be amortized for the first year = Cash interest - Interest expense = $616,000 - $596,400 = $19,600

Calculate unamortized bon premium at the end of first year.

Unamortized bond premium = Premium on bonds payable - Premium amortized = $364,000 - $19,600 = $344,400

Thus, the correct answer is $344,400.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Plesase show work (: On January 1, Bonita Industries issued $6900000, 9% bonds for $7348500. The...
Plesase show work (: On January 1, Bonita Industries issued $6900000, 9% bonds for $7348500. The market rate of interest for these bonds is 8%. Interest is payable annually on December 31. Bonita uses the effective-interest method of amortizing bond premium. At the end of the first year, Bonita should report unamortized bond premium of:
Plesase show work (: On January 1, Bonita Industries issued $6900000, 9% bonds for $7348500. The...
Plesase show work (: On January 1, Bonita Industries issued $6900000, 9% bonds for $7348500. The market rate of interest for these bonds is 8%. Interest is payable annually on December 31. Bonita uses the effective-interest method of amortizing bond premium. At the end of the first year, Bonita should report unamortized bond premium of:
On January 1, Oriole Company issued $5300000, 9% bonds for $4995000. The market rate of interest...
On January 1, Oriole Company issued $5300000, 9% bonds for $4995000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Oriole uses the effective-interest method of amortizing bond discount. At the end of the first year, Oriole should report unamortized bond discount of $282500. $255050. $252000. $271500.
On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000,...
On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2030. The bonds were issued for $$3,805,200 to yield 8%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. The 12/31/23 Premium on Bond Payable balance is: Answer $_______________
On December 31, 2019, when the market rate was 12%, Ricken Corp issued $2,000,000, 14%, 5-year...
On December 31, 2019, when the market rate was 12%, Ricken Corp issued $2,000,000, 14%, 5-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were issued for $2,147,214, and the corporation uses the effective interest method of amortizing bond premium or discount. Prepare the journal entries to record the issuance of the bonds and the first interest payment.
Effective Interest Amortization On January 1, Eagle, Inc., issued $950,000 of 9%, 20-year bonds for $1,016,500...
Effective Interest Amortization On January 1, Eagle, Inc., issued $950,000 of 9%, 20-year bonds for $1,016,500 yielding an effective interest rate of 8%. Semiannual interest is payable on June 30 and December 31 each year. The firm uses the effective interest method to amortize the premium. Required a. Prepare an amortization schedule showing the necessary information for the first two interest periods. Round amounts to the nearest dollar. b. Prepare the journal entry for the bond issuance on January 1....
Brief Exercise 14-6 On January 1, 2017, Coronado Corporation issued $640,000 of 9% bonds, due in...
Brief Exercise 14-6 On January 1, 2017, Coronado Corporation issued $640,000 of 9% bonds, due in 8 years. The bonds were issued for $605,318, and pay interest each July 1 and January 1. Coronado uses the effective-interest method. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 10%.
On January 1, 2016, Tonika Company issued a six-year, $10,000, 10% bond. The interest is payable...
On January 1, 2016, Tonika Company issued a six-year, $10,000, 10% bond. The interest is payable annually each December 31. The issue price was $9,577 based on an 11% effective interest rate. Tonika uses the effective-interest amortization method. The book value of the bonds as of December 31, 2016 is closest to: rev: 10_08_2016_QC_CS-64487 $9,524. $9,630. $53. $8,577.
On December 31, 2019, Repsol Corp issued $1,400,000, 9%, 5-year bonds. Interest is payable semiannually on...
On December 31, 2019, Repsol Corp issued $1,400,000, 9%, 5-year bonds. Interest is payable semiannually on June 30 and December 31. The corporation uses the effective interest method of amortizing bond premium or discount. Using a financial calculator or excel, estimate the issue price of the bonds under the following three assumptions: (1) Market Rate is 9% (2) Market Rate is 8%   
On January 1 of the current year, Franklin Ltd. issued $500,000 (par value) 10%, six year...
On January 1 of the current year, Franklin Ltd. issued $500,000 (par value) 10%, six year bonds when the market rate was 9%, receiving $522,430 cash proceeds. Interest is payable annually on December 31.The corporation uses the effective interest method for amortization of bond premium or discount. Instructions     a.    Calculate the interest expense for the first year.     b.    Calculate the interest expense for the second year.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT