Question

Ava, Inc., issued 8% bonds, dated January 1, with a face amount of $202,900 on January...

Ava, Inc., issued 8% bonds, dated January 1, with a face amount of $202,900 on January 1, 2016 for an issue price of 89. The bonds mature on December 31, 2025 (10 years). For bonds of similar risk and maturity the market yield is 10%. Interest is paid annually on December 31. What is the carrying value of the bond on December 31,2016?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Issue value of bonds = $202,900*89% = $180,581

Face value of bonds = $202,900

Discount on issue of bonds = $202,900 - $180,581 = $22,319

Interest to be paid in cash for 2016 = Face Value of Bond*Interest rate

= $202,900*8% = $16,232

Interest expense as per effective interest method = Issue value*Market rate of interest

= $180,581*10% = $18,058

Discount to be credited to carrying value in 2016 = Interest expense - Interest paid in cash

= $18,058 - $16,232 = $1,826

Carrying value on December 31, 2016 = Issue value+Discount to be credited

= $180,581+$1,826 = $182,407

Therefore the carrying value of bonds on December 31, 2016 is $182,407.

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
ACC Inter II ch 14 10a)Ava, Inc., issued 7% bonds, dated January 1, with a face...
ACC Inter II ch 14 10a)Ava, Inc., issued 7% bonds, dated January 1, with a face amount of $117,200 on January 1, 2016 for an issue price of 106.5. The bonds mature on December 31, 2025 (10 years). For bonds of similar risk and maturity the market yield is 9%. Interest is paid annually on December 31. What is the interest payment on the bond? 10b) A company issued 5%, 20-year bonds with a face amount of $302,000. The market...
On January 1, 2016, Bishop Company issued 8% bonds dated January 1, 2016, with a face...
On January 1, 2016, Bishop Company issued 8% bonds dated January 1, 2016, with a face amount of $20.6 million. The bonds mature in 2025 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. 1. Determine the price of the bonds at January 1, 2016 2.Prepare the journal entry to record the bond issuance by Bishop on January 1, 2016 3.Prepare the journal entry to...
please show all work and explain 1.Emma Company purchased a machine from Noah Corporation on October...
please show all work and explain 1.Emma Company purchased a machine from Noah Corporation on October 31, 2016. In payment for the $99,000 purchase, Emma issued a one-year installment note to be paid in equal monthly payments of $9,076 at the end of each month. The payments include interest at an annual rate of 18%. When recording the December 31, 2016 payment, the Debit to Interest expense will be? $_________ 2.Ava, Inc., issued 9% bonds, dated January 1, with a...
ACC Inter II ch 14 13a) Emma Company purchased a machine from Noah Corporation on October...
ACC Inter II ch 14 13a) Emma Company purchased a machine from Noah Corporation on October 31, 2016. In payment for the $140,300 purchase, Emma issued a one-year installment note to be paid in equal monthly payments of $12,465 at the end of each month. The payments include interest at an annual rate of 12%. When recording the November 30, 2016 payment, the debit to Notes Payable will be $_______ 13b) Ava, Inc., issued 10% bonds, dated January 1, with...
issued 11% bonds, dated January 1, with a face amount of $800,000 on January 1, 2009....
issued 11% bonds, dated January 1, with a face amount of $800,000 on January 1, 2009. The bonds sold for $739,815 and mature in 2028 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. The company uses the effective interest method of amortization and has a calendar year end.   Instructions: Prepare the journal entries that Federal Semiconductors would make on January 1, June 30, December...
Myriad Solutions, Inc. issued 12% bonds, dated January 1, with a face amount of $330 million...
Myriad Solutions, Inc. issued 12% bonds, dated January 1, with a face amount of $330 million on January 1, 2021, for $295,039,998. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest is paid semiannually on June 30 and December 31. Required: Calculate the amounts related to the bonds that Myriad would report in its financial statements. (Round your answers to the nearest whole dollar.)
Myriad Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $320 million...
Myriad Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $320 million on January 1, 2018, for $283,294,720. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Indicate the amounts reported on the financial statements below for the year ending December 31, 2018. Balance Sheet: Net Liability _______ Income Statement: Interest Expense _________ Statement...
ACC Inter II ch 14 4a) Enterprise Group issued $100,000 of 4-year, 6% bonds outstanding on...
ACC Inter II ch 14 4a) Enterprise Group issued $100,000 of 4-year, 6% bonds outstanding on December 31, 2015 for $94,000. Enterprise uses straight-line amortization. On April 1, 2016, $20,000 of the bonds were retired at 96. What is the book value of the bonds sold on April 1? 4b) Ava, Inc., issued 7% bonds, dated January 1, with a face amount of $152,000 on January 1, 2016 for an issue price of 88.5. The bonds mature on December 31,...
Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,000 million...
Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,000 million on July 1, 2021, at a price of $990 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semi-annually on June 30 and December 31. What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2021, if it uses the direct method?
On January 1 2016, Liberty Purchased 10% bonds, dated January 1 2016, with a face amount...
On January 1 2016, Liberty Purchased 10% bonds, dated January 1 2016, with a face amount of $20 million. The bonds mature in 2025 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1 2016. 2. Prepare the journal entry to record the purchase by Liberty on January 1,2016. 3. Prepare the journal entry to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT