Marigold Corporation, a publicly-traded company, agreed to loan
money to another company. On July 1, 2020,...
Marigold Corporation, a publicly-traded company, agreed to loan
money to another company. On July 1, 2020, the company received a
five-year promissory note with a face value of $510,000, paying
interest at a face rate of 4% on July 1 each year. The note was
issued to yield an effective interest rate of 5%. Marigold used the
effective interest method of amortization for discounts or
premiums, and the company’s year-end is September 30.
Use 1. PV.1 Tables, 2. a financial...
Presented below are four independent situations.
(a) On March 1, 2018, Crane Co. issued at 104...
Presented below are four independent situations.
(a) On March 1, 2018, Crane Co. issued at 104 plus accrued
interest $3,690,000, 9% bonds. The bonds are dated January 1, 2018,
and pay interest semiannually on July 1 and January 1. In addition,
Crane Co. incurred $30,000 of bond issuance costs.
Compute the net amount of cash received by Crane Co. as a result
of the issuance of these bonds. (Round present value factor
calculations to 5 decimal places, e.g. 1.25124 and...
On January 1, 2020, Larkspur Inc. issued $580,000 of 4-year, 4%
bonds to yield a market...
On January 1, 2020, Larkspur Inc. issued $580,000 of 4-year, 4%
bonds to yield a market interest rate of 5%. Interest is paid every
quarter on January 1, April 1, July 1, and October 1. Larkspur has
a calendar year end.
Prepare a bond amortization schedule for the first two years (8
interest periods). (Round answers to 0 decimal places,
e.g. 5,276.)
LARKSPUR INC.
Bond Discount Amortization Schedule
Effective-Interest Method
Semi-Annual Interest
Period
Interest Payment
Interest Expense
Amortization
Bond Amortized...
Pearl Company sells 9% bonds having a maturity value of
$1,800,000 for $1,731,764. The bonds are...
Pearl Company sells 9% bonds having a maturity value of
$1,800,000 for $1,731,764. The bonds are dated January 1, 2017, and
mature January 1, 2022. Interest is payable annually on January
1.
a) Determine the effective-interest rate.
The effective-interest rate _______%
b) Set up a schedule of interest expense and
discount amortization under the effective-interest method.
Schedule of Discount Amortization
Effective Interest Method
Year
Cash Paid
Interest Expense
Discount Amortized
Carrying amount of bonds
Jan. 1, 2017
Jan. 1, 2018...
Pearl Company sells 9% bonds having a maturity value of
$1,800,000 for $1,731,764. The bonds are...
Pearl Company sells 9% bonds having a maturity value of
$1,800,000 for $1,731,764. The bonds are dated January 1, 2017, and
mature January 1, 2022. Interest is payable annually on January
1.
a) Determine the effective-interest rate.
The effective-interest rate _______%
b) Set up a schedule of interest expense and
discount amortization under the effective-interest method.
Schedule of Discount Amortization
Effective Interest Method
Year
Cash Paid
Interest Expense
Discount Amortized
Carrying amount of bonds
Jan. 1, 2017
Jan. 1, 2018...
On January 1, 2017, Crane Corporation issued $630,000 of 9%
bonds, due in 10 years. The...
On January 1, 2017, Crane Corporation issued $630,000 of 9%
bonds, due in 10 years. The bonds were issued for $590,745, and pay
interest each July 1 and January 1. Crane 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%.
Ayayai Company sells 10% bonds having a maturity value of
$1,400,000 for $1,299,071. The bonds are...
Ayayai Company sells 10% bonds having a maturity value of
$1,400,000 for $1,299,071. The bonds are dated January 1, 2017, and
mature January 1, 2022. Interest is payable annually on January
1.
Set up a schedule of interest expense and discount amortization
under the straight-line method. (Round answers to 0 decimal places,
e.g. 38,548.)
Schedule of Discount Amortization
Straight-Line Method
Year
Cash
Paid
Interest
Expense
Discount
Amortized
Carrying
Amount of Bonds
Jan. 1, 2017 $
Jan. 1, 2018
Jan. 1,...
On January 1, 2021, Cullumber Satellites issued $1,430,000,
10-year bonds. The bonds pay semi-annual interest on...
On January 1, 2021, Cullumber Satellites issued $1,430,000,
10-year bonds. The bonds pay semi-annual interest on July 1 and
January 1, and Cullumber has a December 31 year end. A partial bond
amortization schedule is presented below:
Semi-Annual
Interest Period
Interest
Payment
Interest
Expense
Amortization
Bond
Amortized Cost
Jan. 1, 2021
$1,328,381
July 1, 2021
$ [1]
$ [2]
$3,593
1,331,974
Jan. 1, 2022
42,900
46,619
3,719
1,335,693
July 1, 2022
42,900
46,749
[3]
1,339,542
Jan. 1, 2023
42,900
46,884...
On January 1, 2021, Sheridan Satellites issued $1,200,000,
10-year bonds. The bonds pay semi-annual interest on...
On January 1, 2021, Sheridan Satellites issued $1,200,000,
10-year bonds. The bonds pay semi-annual interest on July 1 and
January 1, and Sheridan has a December 31 year end. A partial bond
amortization schedule is presented below:
Semi-Annual
Interest Period
Interest
Payment
Interest
Expense
Amortization
Bond
Amortized Cost
Jan. 1, 2021
$1,114,726
July 1, 2021
$ [1]
$ [2]
$3,015
1,117,741
Jan. 1, 2022
36,000
39,121
3,121
1,120,862
July 1, 2022
36,000
39,230
[3]
1,124,092
Jan. 1, 2023
36,000
39,343...
A partial bond amortization schedule for Sandhill Corp. is
provided below. Sandhill has a December 31...
A partial bond amortization schedule for Sandhill Corp. is
provided below. Sandhill has a December 31 year end.
Semi-Annual
Interest Period
Interest
Payment
Interest
Expense
Amortization
Bond
Amortized Cost
Jan. 1, 2021
$392,058
July 1, 2021
$8,200
$9,801
$1,601
393,659
Jan. 1, 2022
8,200
9,841
1,641
395,300
July 1, 2022
8,200
9,883
1,683
396,983
Was the bond issued at a premium or discount?
Record the interest payment on July 1, 2021.
Record the adjusting entry on December 31, 2021.
Record...