acct 212 chapter 14 homework 1

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Problem 14-1A Computing bond price and recording issuance L.O. P1, P2, P3

Stowers Research issues bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds have a $32,000 par value and an annual contract rate of 12%, and they mature in 10 years.

Required:

Consider each of the following three separate situations. (Use .mhhe.com/connect/0078110874/Images/tableb.1.jpg”>Table B.1, .mhhe.com/connect/0078110874/Images/tableb.3.jpg”>Table B.3)

1.

The market rate at the date of issuance is 10%.

(a)

Determine the bonds’ issue price on January 1, 2011. (Round “PV Factors” to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the “$” sign in your response.)

(b)

Prepare the journal entry to record their issuance. (Round “PV Factors” to 4 decimal places, intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

2.

The market rate at the date of issuance is 12%.

(a)

Determine the bonds’ issue price on January 1, 2011. (Round “PV Factors” to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the “$” sign in your response.)

Issue price

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(b)

Prepare the journal entry to record their issuance. (Round “PV Factors” to 4 decimal places, intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

3.

The market rate at the date of issuance is 14%.

(a)

Determine the bonds’ issue price on January 1, 2011. (Round “PV Factors” to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the “$” sign in your response.)

Issue price

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(b)

Prepare the journal entry to record their issuance. (Round “PV Factors” to 4 decimal places, intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

rev: 03_02_2012

eBook Links (3)

Worksheet

Difficulty: Medium

Learning Objective: 14-P2 Compute and record amortization of bond discount.

Problem 14-1A Computing bond price and recording issuance L.O. P1, P2, P3

Learning Objective: 14-P1 Prepare entries to record bond issuance and interest expense.

Learning Objective: 14-P3 Compute and record amortization of bond premium.

.

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Problem 14-2A Straight-line amortization of bond discount L.O. P1, P2

Heathrow issues $3,000,000 of 6%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,592,334.

Required:

1.

Prepare the January 1, 2011, journal entry to record the bonds’ issuance. (Omit the “$” sign in your response.)

2(a)

For each semiannual period, compute the cash payment. (Do not round your intermediate calculations. Omit the “$” sign in your response.)

2(b)

For each semiannual period, compute the the straight-line discount amortization. (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)

Amount of discount amortization

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2(c)

For each semiannual period, compute the bond interest expense. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the “$” sign in your response.)

Bond interest expense

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3.

Determine the total bond interest expense to be recognized over the bonds’ life. (Do not round semi-annual interest rate. Round intermediate calculations to the nearest dollar. Omit the “$” sign in your response.)

Total bond interest expense

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4.

Prepare the first two years of an amortization table using the straight-line method. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

5.

Prepare the journal entries to record the first two interest payments. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

3.

award:
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Problem 14-3A Straight-line amortization of bond premium L.O. P1, P3

Heathrow issues $1,600,000 of 9%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,958,394.

Required:

1.

Prepare the January 1, 2011, journal entry to record the bonds’ issuance. (Omit the “$” sign in your response.)

Date

General Journal

Debit

Credit

Jan. 1

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2(a)

For each semiannual period, compute the cash payment. (Do not round your intermediate calculations. Omit the “$” sign in your response.)

Cash payment

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2(b)

For each semiannual period, compute the the straight-line premium amortization. (Round your final answer to the nearest dollar amount. Omit the “$” sign in your response.)

Amount of premium amortized

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2(c)

For each semiannual period, compute the the bond interest expense. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the “$” sign in your response.)

Bond interest expense

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3.

Determine the total bond interest expense to be recognized over the bonds’ life. (Do not round your intermediate calculations. Omit the “$” sign in your response.)

Total bond interest expense

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4.

Prepare the first two years of an amortization table using the straight-line method. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

5.

Prepare the journal entries to record the first two interest payments. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

eBook Links (2)

Worksheet

Difficulty: Medium

Learning Objective: 14-P3 Compute and record amortization of bond premium.

Problem 14-3A Straight-line amortization of bond premium L.O. P1, P3

Learning Objective: 14-P1 Prepare entries to record bond issuance and interest expense.

4.

award:
0 out of
5.00 points

Problem 14-5AB Effective interest amortization of bond premium; computing bond price L.O. P1, P3

Saturn issues 8.5%, five-year bonds dated January 1, 2011, with a $490,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $542,250. The annual market rate is 6% on the issue date.

1.

Compute the total bond interest expense over the bonds’ life. (Do not round intermediate calculations. Omit the “$” sign in your response.)

Total bond interest expense

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2.

Prepare an effective interest amortization table for the bonds’ life. (Make sure that the unamortized premium equals to ‘0’ and the Carrying value equals to face value of the bond in the last period. Leave no cells blank – be certain to enter “0” wherever required. Bond interest expense in the last period should be calculated as Cash interest paid (?) Premium amortized. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.)

Semiannual Interest
Period-End

(A)
Cash Interest
Paid

(B)
Bond Interest
Expense

(C)
Premium
Amortization

(D)
Unamortized
Premium

(E)
Carrying
Value

1/01/2011

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6/30/2011

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12/31/2011

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6/30/2012

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12/31/2012

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6/30/2013

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12/31/2013

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6/30/2014

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12/31/2014

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6/30/2015

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12/31/2015

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Total

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3.

Prepare the journal entries to record the first two interest payments. (Round your answers to nearest dollar amount. Omit the “$” sign in your response.)

Date

General Journal

Debit

Credit

June 30, 2011

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Dec. 31, 2011

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4.

Use the market rate at issuance to compute the present value of the remaining cash flows for these bonds as of December 31, 2013. (Use .mhhe.com/connect/0078110874/Images/tableb.1.jpg”>Table B.1, .mhhe.com/connect/0078110874/Images/tableb.3.jpg”>Table B.3) (Round “PV Factors” to 4 decimal places, intermediate and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

Present value

$ n/r .gif” alt=”incorrect”>

rev: 08_13_2011

eBook Links (2)

Worksheet

Difficulty: Hard

Learning Objective: 14-P3 Compute and record amortization of bond premium.

Problem 14-5AB Effective interest amortization of bond premium; computing bond price L.O. P1, P3

Learning Objective: 14-P1 Prepare entries to record bond issuance and interest expense.

Problem 14-6A Straight-line amortization of bond discount L.O. P1, P2

[The following information applies to the questions displayed below.]

Patton issues $590,000 of 7.5%, four-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. They are issued at $542,310 and their market rate is 10% at the issue date.

Section Break

Difficulty: Hard

Learning Objective: 14-P2 Compute and record amortization of bond discount.

Problem 14-6A Straight-line amortization of bond discount L.O. P1, P2

Learning Objective: 14-P1 Prepare entries to record bond issuance and interest expense.

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