Assignment 4

Ivanhoe Company issued $1360000 of 6%, 5-year bonds at 95, which pay interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

$1,305,600

Cullumber Company issued $1840000 of 6%, 5-year bonds at 98. Assuming straight-line amortization and annual interest payments, how much bond interest expense is recorded on the next interest date?

$117,760

A corporation issues $192000, 8%, 5-year bonds on January 1, 2020, for $200100. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized in December 31, 2020's adjusting entry is

$13,740

The adjusted trial balance for Whispering Winds Corp. at the end of the current year contained the following accounts. 5-year Bonds Payable 8% $1890000; Bond Interest Payable 59000; Premium on Bonds Payable 118000; Notes Payable (3 mo.) 47000; Notes Payable (5 yr.) 195000; Mortgage Payable ($18000 due currently )236000; Salaries and Wages Payable 21000; Taxes Payable (due 3/15 of next yr)30000 The total long-term liabilities reported on the balance sheet are

$2,421,000

A corporation issues $237000, 10%, 5-year bonds on January 1, 2020, for $227100. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in December 31, 2020's adjusting entry is

$25,680 237000-227100=9900 9900/5=1980 .10 x 237000=23700 1980+23700=25680

On January 1, 2020, $2010000, 10-year, 10% bonds, were issued for $1950000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

$500 2010000-1950000=60000 60000/10=6000 6000/12=500

Bonds with a face value of $600000 and a quoted price of 97.25 have a selling price of

$583,500 0.9725 x 600000

Brazen Inc. sells bonds with a face value of $1,000,000 and a contract interest rate of 9% for $1,200,000. The bonds will mature in 10 years. Using the straight line method of amortization of the bonds' premium, how much interest expense will be recognized in year 1?

$70,000 1200000-1000000=200000 200000/10=20000 .09 x 1000000=90000 90000-20000=70000

Bonds with a face value of $720000 and a quoted price of 102.25 have a selling price of

$736,200 1.0225 x 720,000

On January 1, 2020, $9200000, 5-year, 10% bonds, were issued for $9752000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize premium on bonds payable, the monthly amortization amount is

$9,200 9752000-920000=552000 552000/5=110400 110400/12=9200

Crane Company issued $860000 of 8%, 5-year bonds at 109, which pay interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

$921,920

How is the market value of a bond issuance determined?

By adding the present value of the principles amount to the present value of the interest payments

Content Covered

Ch 10 Reporting and Analyzing Liabilities 10.2 Major Characteristics of Bonds 10.4 Presentation and Analysis 10.5 Appendix 10A: Straight‐Line Amortization

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

adding the amount of discount amortized for that period to the amount of cash paid for interest during the period

The contractual rate of interest is usually stated as a(n)

annual rate

On January 1, Flounder Corp. issues $2280000, 5-year, 12% bonds at 97 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

credit to Discount on Bonds Payable for $13,680

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

discount

When a bond is sold at a premium, at what value is it reported on the balance sheet?

face value plus any premium

The present value of a bond is also known as its

market price

The contractual interest rate on a bond is often referred to as the

stated rate