Question

A company issued $600,000 of 13%, ten-year convertible bonds on January 1, 2020 at 107, with...

A company issued $600,000 of 13%, ten-year convertible bonds on January 1, 2020 at 107, with interest payable July 1 and January 1. Bond discount/premium is amortized semiannually on a straight-line basis. How much interest expense should the company record on June 30, 2020? (If there is no interest expense to be recorded, then enter 0.)

Homework Answers

Answer #1

Bonds Value = $600,000

Issue Price = $600,000 * 107/100 = $642,000

Premium on Bonds = $642,000 - $600.000 =$42,000

As, Interet is payable semiannually, So Interest Payment terms = 10 Years * 2 = 20 Payment terms

Interest Expense = Cash Interest on Bond - Premium Amortized

= (Bond Par value * Interest Rate * 6/12) - (Total Premium on Bond / No. of Interest Payment terms)

= ($600,000 * 13% * 6/12) - ($42,000 / 20)

= $39,000 - $2,100

= $36,900

Therefore, Interest expense record on June 30, 2020 = $36,900

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 1, 2020, Sro Company issued ten convertible bonds with a par value of $8,000...
On January 1, 2020, Sro Company issued ten convertible bonds with a par value of $8,000 per bond in market for $82,000 in total. Each bond is convertible into 800 ordinary shares of $3 per ordinary share par value. The bonds have a four-year life and a stated interest rate of 8% payable annually. The market interest rate for similar non-convertible bonds on January 1, 2020, is 9%. Prepare the amortization schedule for the bonds, including the cash interest, interest...
Sheffield Corp. issued $6000000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus...
Sheffield Corp. issued $6000000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2021, $1150000 of these bonds were converted into 400 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. What was the effective interest rate on the...
Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on Jan 1, 2017 at 102. The...
Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on Jan 1, 2017 at 102. The bonds were dated Jan 1, 2017 with interest payable June 30 and December 31. Bond discount is amortized semiannually on a straight-line basis. Each $1,000 debenture is convertible into 40 shares of Chang $20 par common stock. On Jan 1, 2018, $1,200,000 of these bonds were converted. What should be the amount of the debit to Interest Expense on June 30, 2017? a.   $306,000...
On January 1, 2020, Sro Company issued ten convertible bonds with a par value of $8,000...
On January 1, 2020, Sro Company issued ten convertible bonds with a par value of $8,000 per bond in market for $82,000 in total. Each bond is convertible into 800 ordinary shares of $3 per ordinary share par value. The bonds have a four-year life and a stated interest rate of 8% payable annually. The market interest rate for similar non-convertible bonds on January 1, 2020, is 9%. c. Assume that the bond matured on December 31, 2023 and Sro...
(a) Metlock Co. sold $1,930,000 of 12%, 10-year bonds at 106 on January 1, 2020. The...
(a) Metlock Co. sold $1,930,000 of 12%, 10-year bonds at 106 on January 1, 2020. The bonds were dated January 1, 2020, and pay interest on July 1 and January 1. If Metlock uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2020, and December 31, 2020. (Round answer to 0 decimal places, e.g. 38,548.) Interest expense to be recorded $ (b) Bonita Inc. issued $610,000 of...
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....
1. On April 1, 2020 Garr Co. issued $3,000,000 of 5%, 5-year convertible bonds at a...
1. On April 1, 2020 Garr Co. issued $3,000,000 of 5%, 5-year convertible bonds at a price of 98. The bonds pay interest on April 1 and October 1. Bond discount is amortized each interest payment period on a straight-line basis. On April 1, 2021, all of these bonds were converted into 20,000 shares of $5 par common stock. a) Prepare the entry to record the original issuance of the convertible bonds. b) Prepare the entries to record the interest...
1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a...
1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a face value of $81,000. The bonds are sold for $78,570. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Queen records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31. 2. The Marx Company issued $88,000 of 12% bonds on April 1 of...
On January 1, 2020, Pearl Company sold 11% bonds having a maturity value of $600,000 for...
On January 1, 2020, Pearl Company sold 11% bonds having a maturity value of $600,000 for $622,744, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Pearl Company allocates interest and unamortized discount or premium on the effective-interest basis. Prepare the journal entry at the date of the bond issuance.
The Simon Corporation issued 10-year, $5,000,000 par, 7% callable convertible subordinated debentures on January 2, 2020....
The Simon Corporation issued 10-year, $5,000,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Simon’s effective tax was 20%. Net income in 2020 was $9,500,000, and the company had 2,000,000 shares outstanding...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT