Exercise 14-09 (Part Level Submission)
On June 30, 2020, Larkspur Company issued $3,660,000 face value of 13%, 20-year bonds at $3,935,340, a yield of 12%. Larkspur uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
(a) Your answer is correct.
Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2021, balance sheet. (Round answers to 0 decimal places, e.g. 38,548.)
Larkspur Company Balance Sheet December 31, 2021For the Year Ended December 31, 2021For the Quarter Ended December 31, 2021 |
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Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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$ | |||
Discount on Notes PayableCashBook Value of Bonds PayableLoss on Redemption of BondsPremium on Bonds PayableInterest ExpenseNotes PayableInterest PayableNotes ReceivableBad Debt Expense |
$ |
Provide the answers to the following questions.
(1) What amount of interest expense is reported
for 2021? (Round answer to 0 decimal places, e.g.
38,548.)
Interest expense reported for 2021 | $ |
(2) Will the bond interest expense reported in
2021 be the same as, greater than, or less than the amount that
would be reported if the straight-line method of amortization were
used?
The bond interest expense
reported in 2021 will be
greater thanless thansame as the amount that would be reported if the straight-line method of amortization were used. |
(3) Determine the total cost of borrowing over the
life of the bond. (Round answer to 0 decimal places,
e.g. 38,548.)
Total cost of borrowing over the life of the bond | $ |
(4) Will the total bond interest expense for the
life of the bond be greater than, the same as, or less than the
total interest expense if the straight-line method of amortization
were used?
The total bond interest
expense for the life of the bond will be
greater thanless thanthe same as the total interest expense if the straight-line method of amortization were used. |
Answer:
Answer-(1):
Interest expense reported for 2021 = $471,914
Explanation:
Answer-(2):
The bond interest expense reported in 2021 will be less than the amount that would be reported if the straight-line method of amortization were used.
Explanation:
Exercise 14-09 (Part Level Submission) On June 30, 2020, Larkspur Company issued $3,660,000 face value of...
Exercise 14-09 (Part Level Submission) On June 30, 2020, Larkspur Company issued $3,660,000 face value of 13%, 20-year bonds at $3,935,340, a yield of 12%. Larkspur uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. (a) Your answer is correct. Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account...
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Exercise 14-09 (Part Level Submission) On June 30, 2020, Larkspur Company issued $3,660,000 face value of 13%, 20-year bonds at $3,935,340, a yield of 12%. Larkspur uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. (a) Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0...
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