College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Textbook Question
Chapter 22, Problem 1CP
CHALLENGE PROBLEM
This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter.
On April 1, 20-1, Rebound Co. issued $300,000 of 10%, 10-year bonds, callable at 105 after three years, at face value. On April 1, 20-4, after completing three years of interest payments on the bonds, Rebound is considering calling the bonds and issuing $300,000 of new 8%, 10-year bonds at face value. The current market interest rate is only 8%, so Rebound thinks it might save money by taking this action.
REQUIRED
1. Compute the net savings to Rebound over the life of the original bond issue if it calls the old bonds and issues the new bonds.
2. Assuming Rebound calls the original bond issue, prepare the
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On January 2, Year 1, Kampai Sushi Bar sold $800,000 of bonds for $785,000. The bonds will mature in 10 years and pay interest annually on December 31. The company properly recorded the payment of interest and the amortization of the discount using the effective interest method. What will be the carrying value of the bonds at the end of Year 1?
a.$800,000
b.less than $785,000
c.$785,000
d.greater than $785,000, but less than $800,000
Knowledge Check 01
On January 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issued at face value. The bonds
have a stated interest rate of 8% and pay interest once per year on December 31.
Prepare the appropriate journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No
Journal Entry Required" in the first account field.)
-
View transaction list View journal entry worksheet
No
1
Transaction
A
Gain on Bond Retirement
Interest Expense
General Journal
Debit
104,000
Credit
8,000
Ⓒ
Use the following to answer questions 4-7 (Round answers to the nearest dollar)
The company issues 7.4%, 5-year bonds with a total face amount of $100,000. The market interest rate for bonds of
similar risk and maturity is 7.6%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU
FULLY COMPLETE THE PROBLEM SET (input your answers after you've completed the entire problem).
5.
7.
will
S
expense?
S
payment?
(rounded to nearest dollar). What is the issue price of the bond?
(rounded to nearest dollar). When the company records the first interest payment, how much
record
company
for
interest.
the
(rounded to nearest dollar). What is the bond liability (carrying amount) after the first interest
(rounded to nearest dollar). When the company records the second interest payment, how
much will the company record for interest expense?
Chapter 22 Solutions
College Accounting, Chapters 1-27
Ch. 22 - A secured bond is one that is backed by specific...Ch. 22 - Prob. 2TFCh. 22 - When bonds are issued at face value, the debit to...Ch. 22 - Prob. 4TFCh. 22 - Prob. 5TFCh. 22 - Bonds that give the holder the option of...Ch. 22 - Prob. 2MCCh. 22 - Prob. 3MCCh. 22 - Prob. 4MCCh. 22 - Bond sinking fund earnings are (a) subtracted from...
Ch. 22 - Prob. 1CECh. 22 - Prob. 2CECh. 22 - Prob. 3CECh. 22 - Prob. 4CECh. 22 - Prob. 5CECh. 22 - Prob. 1RQCh. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - What accounts are affected when bonds are issued...Ch. 22 - Prob. 6RQCh. 22 - Prob. 7RQCh. 22 - Prob. 8RQCh. 22 - Prob. 9RQCh. 22 - When bonds are redeemed before maturity, how is...Ch. 22 - Prob. 11RQCh. 22 - How should sinking fund earnings be reported on...Ch. 22 - Prob. 13RQCh. 22 - Prob. 1SEACh. 22 - Prob. 2SEACh. 22 - Prob. 3SEACh. 22 - REDEMPTION OF BONDS ISSUED AT FACE VALUE Levesque...Ch. 22 - REDEMPTION OF BONDS ISSUED AT A PREMIUM Brighton...Ch. 22 - REDEMPTION OF BONDS ISSUED AT A DISCOUNT...Ch. 22 - BOND SINKING FUNDS M. J. Adams Corporation pays...Ch. 22 - BONDS ISSUED AT FACE VALUE Ito Co. issued the...Ch. 22 - Prob. 9SPACh. 22 - Prob. 10SPACh. 22 - Prob. 11SPACh. 22 - Prob. 12SPACh. 22 - Prob. 13SPACh. 22 - Prob. 1SEBCh. 22 - Prob. 2SEBCh. 22 - Prob. 3SEBCh. 22 - Prob. 4SEBCh. 22 - Prob. 5SEBCh. 22 - REDEMPTION OF BONDS ISSUED AT A DISCOUNT Medina...Ch. 22 - Prob. 7SEBCh. 22 - BONDS ISSUED AT FACE VALUE Ramona Arroyo Co....Ch. 22 - Prob. 9SPBCh. 22 - Prob. 10SPBCh. 22 - Prob. 11SPBCh. 22 - BONDS ISSUED AT A DISCOUNT, REDEEMED AT A GAIN...Ch. 22 - Prob. 13SPBCh. 22 - MANAGING YOUR WRITING The business where you work...Ch. 22 - Prob. 1ECCh. 22 - MASTERY PROBLEM Jackson, Inc.s fiscal year ends...Ch. 22 - CHALLENGE PROBLEM This problem challenges you to...
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