Mitchell Inc., issued 40, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest...
Mitchell Inc., issued 40, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30 and December 31, and were issued to yield 7%. The bonds mature December 31, 2022, and the company will use the straight-line interest method to amortize the bond discount or premium. Assume that the difference between the effective interest method and the straight-line interest method is not material.
Required
a. Determine the selling price of the bonds.
b. Prepare the straight-line interest amortization schedule for the full bond term.
c. Prepare journal entries on the following dates.
1. January 1, 2020, bond issuance.
2. June 30, 2020, interest payment.
3. December 31, 2020, interest payment.
Homework Answers
| Mitchell Inc. | |
| Bond Par value | $ 1,000.00 |
| Semi annual Interest payment @6% pa= | $ 30.00 |
| Yield = | 7% |
| Semi annual yield = | 3.5% |
| Maturity period in years | 3 |
| No of Coupon Payments = | 6 |
| PVIF factor @3.5% for 6 periods=[1-1.035^-6)/3.5%= | 5.32855302 |
| PV factor for 6 periods @3.5% =1/1.035^6= | 0.8135 |
| Finding Current Value of Bond fron PV of Cash flows |
| Cash Flow | Amt $ | PVIF/PV Factor | PV of Cash flow |
| Semi annual Interest = | 30 | 5.32855302 | 159.86 |
| Maturity Value = | 1000 | 0.8135 | 813.50 |
| Total PV of Cash flows | 973.36 | ||
| So Current Bond Price =$973.36 | Ans a. |
| Ans b. | |
| Bond Par value | $ 1,000.00 |
| Bond Selling Price | $ 973.36 |
| Discount on Bond | $ 26.64 |
| Maturity period =3 years = 6 Half years | |
| Discounts Amortization per Half year =26.64/6= | $ 4.44 |
| Ans c. | |||
| sr no | Journal entries | Dr $ | Cr $ |
| Jan 1.20. | Cash | $ 973.36 | |
| Bond Payable | $ 1,000.00 | ||
| Discount on Bond Payable | $ 26.64 | ||
| Jun 30.20. | Interest Payable | $ 30 | |
| Interest Expense | $ 34.44 | ||
| Discount on Bond Payable | $ 4.44 | ||
| Dec 31.20. | Interest Payable | $ 30 | |
| Interest Expense | $ 34.44 | ||
| Discount on Bond Payable | $ 4.44 |
Add Answer to:
Mitchell Inc., issued 40, 6%, $1,000 bonds on January 1, 2020.
The bonds pay cash interest...
Mitchell Inc. issued 42, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest...
Mitchell Inc. issued 42, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization schedule for the full bond term. C. Prepare journal entries on...
Mitchell Inc. issued 60, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest...
Mitchell Inc. issued 60, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest annually each December 31 and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization schedule for the full bond term. c. Prepare journal entries on the following dates....
Recording Bond Entries and Preparing an Amortization Schedule-Effective Interest Method, Premium Mitchell Inc. issued 42, 6%,...
Recording Bond Entries and Preparing an Amortization Schedule-Effective Interest Method, Premium Mitchell Inc. issued 42, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization...
Recording Bond Entries and Preparing an Amortization Schedule-Effective Interest Method, Premium Mitchell Inc. issued 120, 6%,...
Recording Bond Entries and Preparing an Amortization Schedule-Effective Interest Method, Premium Mitchell Inc. issued 120, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest annually each December 31 and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization schedule for the...
Marin Company issued $408,000 of 9%, 20-year bonds on January 1, 2020, at 101. Interest is...
Marin Company issued $408,000 of 9%, 20-year bonds on January 1, 2020, at 101. Interest is payable semiannually on July 1 and January 1. Marin Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry") (a)The issuance of the bonds. (b)The payment of interest and the related amortization on July 1, 2020. (c)The accrual of interest and the related amortization on December...
Problem 1 Part A: On January 1, Altman Company issued bonds that had a par value...
Problem 1 Part A: On January 1, Altman Company issued bonds that had a par value of $77 509 ith a stated interest rate of 4% and a 5 year maturity date. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued at 103 1/2. a) Prepare the journal entries Altman Company must record in its books at bond issuance and the first interest payment date. Altman Company uses the straight line method to amortize...
Sage Company issued $432,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is...
Sage Company issued $432,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. Sage Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance...
Exercise 10-7 Straight-Line: Amortization of bond premium LO P3 Quatro Co. issues bonds dated January 1,...
Exercise 10-7 Straight-Line: Amortization of bond premium LO P3 Quatro Co. issues bonds dated January 1, 2017, with a par value of $900,000. The bonds’ annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $947,165. 1. What is the amount of the premium on these bonds at issuance? 2. How...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $890,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $890,000. The bonds’ annual contract rate is 12%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $935,160. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized...
Blue Company issued $480,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is...
Blue Company issued $480,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. Blue Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually) (a) The issuance of...
Mitchell Inc. issued 42, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization schedule for the full bond term. C. Prepare journal entries on...
Recording Bond Entries and Preparing an Amortization Schedule-Effective Interest Method, Premium Mitchell Inc. issued 42, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization...
Recording Bond Entries and Preparing an Amortization Schedule-Effective Interest Method, Premium Mitchell Inc. issued 120, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest annually each December 31 and were issued to yield 5%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. Round amount to the nearest whole dollar. b. Prepare an amortization schedule for the...
Problem 1 Part A: On January 1, Altman Company issued bonds that had a par value of $77 509 ith a stated interest rate of 4% and a 5 year maturity date. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued at 103 1/2. a) Prepare the journal entries Altman Company must record in its books at bond issuance and the first interest payment date. Altman Company uses the straight line method to amortize...
Blue Company issued $480,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. Blue Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually) (a) The issuance of...
Most questions answered within 3 hours.
-
How many milliliters of 0.0695 M Ca( OH)
2would be required to exactly neutralize 176 mL...
asked 17 minutes ago -
A telephone survey uses a random digit dialing machine to call
subjects. The random digit dialing...
asked 50 minutes ago -
How can having too little or too much of a certain
protein cause problems for an...
asked 2 hours ago -
Assume a muscle has a PCSA = 20 cm2 and Lo = 12 cm. Assume it...
asked 3 hours ago -
What is the yield to maturity of a ten-year, $1,000 bond with a
5.2% coupon rate...
asked 4 hours ago -
A mass m = 5 kg is tied on one end of a rope and is...
asked 4 hours ago -
The Average sales price of single-family houses in Charlotte is
$210,000 with a standard deviation of...
asked 4 hours ago -
Target Costing
Laser Impressions, Inc., manufactures color laser printers.
Model J20 presently sells for $225 and...
asked 4 hours ago -
a bottle cap manufacturer with four machines and six operators
wants to see if variation in...
asked 5 hours ago -
State Farm Insurance studies show that in Colorado, 55% of the
auto insurance claims submitted for...
asked 6 hours ago -
Complete the following reactions which form ethers (A
and B) and cyclic ethers (C-E) as major...
asked 6 hours ago -
in a perfectly elastic collision what is the velocity of ball A
if the original direction...
asked 7 hours ago