On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a...

Question

Question

On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a...

On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a contractual interest rate of “LIBOR plus 5.5%,” which is reset annually on January 1 of each year. The LIBOR rates on January 1, 2017, 2018, and 2019, were 6.5%, 7.0%, and 5.5%, respectively.

Required:

Prepare a journal entry to record the issuance of the bonds on January 1, 2017, at par. What was the effective (or market) interest rate when the bonds were issued?
Prepare a journal entry to record interest expense for 2017, 2018, and 2019. Assume that interest is paid annually on December 31.
What is the market value of the debt at December 31, 2019, assuming Nicks Corporation’s credit risk has not changed.

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

ANSWER

Requirement 1:

journal entry to record the issuance on january 1,2017:

Requirement 2:

Interest expenses for 2017:

Interest expenses for 2018:

Interest expenses for 2019:

Requirement 3:

---------------------------------------------------------------------
If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating
DEAR STUDENT,

*****************THANK YOU**************

Add a comment

Answer 2

Similar Homework Help Questions

On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a...

On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a contractual interest rate of “LIBOR plus 5.5%,” which is reset annually on January 1 of each year. The LIBOR rates on January 1, 2017, 2018, and 2019, were 6.5%, 7.0%, and 5.5%, respectively. Required: Prepare a journal entry to record the issuance of the bonds on January 1, 2017, at par. What was the effective (or market) interest rate when the bonds were issued?...
On January 1, 2017, Tango-In-The-Night, Inc., issued $75 million of bonds with an 8% coupon interest...

On January 1, 2017, Tango-In-The-Night, Inc., issued $75 million of bonds with an 8% coupon interest rate. The bonds mature in 10 years and pay interest semi-annually on June 30 and on December 31 of each year. The market rate of interest on January 1, 2017, for bonds of this type was 8%. The company closes its books on December 31. Tango-In-The-Night elects the fair value option under ASU 2016-1. Ignore tax effects. Required: At what price were the bonds...
Strathern Corporation issued ten-year term bonds dated January 1, 2017, with a face value of $800,000....

Strathern Corporation issued ten-year term bonds dated January 1, 2017, with a face value of $800,000. The face interest rate is 10 percent, and interest is payable annually December 31. The bonds were issued for $708,400 to yield an effective annual rate of 12 percent. Use the effective interest method of amortization. Round answers to the nearest dollar. a. Prepare entries in journal form without explanations to record the bond issue on January 1, 2017, and the payments of interest on January,...

Jabieb corporation issued 3,000 convertible bonds on January 1, 2018. The bonds have a 3-year lif...

Jabieb corporation issued 3,000 convertible bonds on January 1, 2018. The bonds have a 3-year life and are issued at par with a face value of $1,000 per bond, giving total proceedings of $3,000,000. Interest is payable annually at 6%. Each bond is convertible into 200 ordinary shares (par value $1). The market rate of interest on similar non-convertible debt is 8% a) Compute the liability and equity component of the convertible bond on January 1, 2018. (5 marks) b)...
On January 1, 2018, whittington Stoves issued $750 million of its 6% bonds for $686 million....

On January 1, 2018, whittington Stoves issued $750 million of its 6% bonds for $686 million. The bonds were priced to yield 8%. Interest is payable semiannually on June 30 and December 31. Whittington records interest at the effective rate and elected the option to report these bonds at their fair value. One million dollars of the increase in fair value was due to a change in the general (risk-free) rate of interest. On December 31, 2018, the fair value...
5 % On January 1, 2017, Lock Corporation issued $1,800,000 face value, 1 10 -year bonds...

5 % On January 1, 2017, Lock Corporation issued $1,800,000 face value, 1 10 -year bonds at $1,667,518 This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January 1. Instructions: (Round all computations to the nearest dollar.) (a) Prepare the journal entry to record the issuance of the bonds on January 1, 2017. 01/01/14 Account title Account title Account title Amount...

Universal Foods issued 8% bonds, dated January 1, with a face amount of $250 million on...

Universal Foods issued 8% bonds, dated January 1, with a face amount of $250 million on January 1, 2018. The bonds mature on December 31, 2032 (15 years). The market rate of interest for similar issues was 10%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:...
Problem Two: On January 1, 2017, Ashlock Chemical AG issued €4,000,000, 10%, 10-year bonds at €4,543,627....

Problem Two: On January 1, 2017, Ashlock Chemical AG issued €4,000,000, 10%, 10-year bonds at €4,543,627. This price resulted in an 8% effective-interest rate on the bonds. Ashlock uses the effective-interest method to amortize bond premium or discount. The bonds pay interest semi-annually on January 1 and July 1. Rounding to two decimal places, answer the following: a) Use Present Value of 1 Table and Present Value of an Annuity of 1 Table, and your knowledge of time value of...
On January 1, 2017, Learned Inc, issued $16 million face amount of 20-year, 18% stated rate...

On January 1, 2017, Learned Inc, issued $16 million face amount of 20-year, 18% stated rate bonds when market interest rates were 20%. The bonds pay interest semiannually each June 30 and December 31 and mature on December 31, 2036. Calculate the proceeds (issue price) of Learned Inc.’s, bonds on January 1, 2017, if the bonds were sold to provide a market rate of return to the investor. Assume instead that the proceeds were $16,411,000. Record the journal entry to...

On January 1, 2017, Klosterman Company issued $400,000, 8%, 10-year bonds at face value. Interest is...

On January 1, 2017, Klosterman Company issued $400,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1. Question 1 On January 1, 2017, Klosterman Company issued $400,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1. Prepare the journal entry to record the issuance of the bonds. (Credit account tities are automatically indented when amount is ent Date Account Titles and Explanation Debit Credit Jan. 1, 2017 SHOW LIST OF ACCOUNTS LINK...

On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a...

Homework Answers

Add Answer to:
On January 1, 2017, Nicks Corporation issued $250 million of floating-rate debt. The debt carries a...

Post as a guest

Earn Coins