Question

I need help with 21,2

3,25,and 26 been really trying with these ones

  

E12-19 P oing morsgages payable Kellerman ly payments of for journal 2. 3Joual alyzing alternative pians to raise money SB Electronics is considering two plans for raising $4,000,000 to expand operations. Plan A is to issue 9% bonds payable, and plan B is to issue 50),000 shares of com- mon stock. Before any new financing, SB Electronics has net income of $350,000 and 300,000 shares of common stock ourstanding Management believes the company can use the new funds to carn additional income of $700,000 before interest and taxes. The income tax rate is 30%. Analyze the SB Electronics situation to determine which plan will result in higher earnings per share. Use Exhibit 12-6 as a guide. E12-21 Determining bond prices and interest expense Jones Company is planning to issue $490,000 of 9%, five-year bonds payable to borrow for a major expansion. The owner, Shane Jones, asks your advice on some related matters. Requirements 1. Answer the following questions: a. A t what type of bond price will Jones Company have total interest expense qual to the cash interest payments? Under which type of bond price will Jones Company's total interest expense be greater than the cash interest payments? b. C. If the market interest rate is 12%, what type of bond price can Jones Company 2. Compute the price of the bonds if the bonds are issued at 89, 3. How much will Jones Company pay in interest each year? How much will Jones expect for the bonds? Company's interest expense be for the first year? 3 E12-22 Journalizing bond issuance and interest payments 1. Lompute the price of the bonds if the bonds are issued at 89 pay in interest each year? How much will Jones 3. How much will Jones Company Company's interest expense be for the first year? Learning Objective 3 E12-22 Journalizing bond issuance and interest payments On June 30, Parker Company issues 1 1%, five-year bonds payable of $120,000. The bonds are issued at face value and pay interest on j December 31. with a face value 2 Interest Exp. $6,600 Requirements 1. Journalize the issuance of the bonds on June 30. 2. Journalize the semiannual interest payment on December 31 Learning Objective 3 E12-23 Journalizing bond issuance and interest payments On June 30, Daughtry Limited issues 8%, 20-year bonds payable with a face value of 1. June 30 Discount $18,200 30,000. The bonds are issued at 86 and pay interest on June 30 and December ai Requirements 1. Journalize the issuance of the bonds on June 30. 2. Journalize the semiannual interest payment and amortization of bond discount on December 31. E12-24 Journalizing bond transactions Learning Objective 3 Anderson Company issued $70,000 of 10-year, 9% bonds payable on January 1, 2018. Anderson Company pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line amortization method. The company can issue its bonds payable under various conditions. Interest Expense $3,430 Requirements I. Journalize Anderson Company's issuance of the bonds and first semiannual Long Term Liabilities 661 E12-25 Journalizing bond issuance and interest payments Learning Objectives 3, 4 On January 1, 2018, Roberts Unlimited issues 8%,20-year bonds payable with a face value of $240,000. The bonds are issued at 104 and pay interest on June 30 and December 31 m $9,500 Requirements 1. Journalize the issuance of the bonds on January 1,2018. 2. Journalize the semiannual interest payment and amortization of bond premium on June 30, 2018. 3. Journalize the semiannual interest payment and amortization of bond premium 4. Journalize the retirement of the bond at maturity, assuming the last interest p ment has already been recorded. (Give the date.) E12-26 Retiring bonds payable before maturity Coa tal eu Magazi e issued $600,000 of 15-year 5% callable bonds payable on Jul 31, 2018, at 94. On July 31, 2021, CoastalVien called the bonds at 101. Assume anna interest payments. Requirements 1. Without making journal entries, compute the carrying amount of the bonds pay able at July 31, 2021 2. Assume all amortization has been recorded properly, Journalize the retirement of the bonds on July 31, 2021. No explanation is required. Learning Objectives 2, 3,5

Answer 1

E 12 - 21:

1. a. Interest expense will equal cash interest payment when the bonds are issued at par, i.e for $ 490,000.

b. Total interest expense will be greater than the cash interest payments when the bonds are issued at a discount, i. the market price of the bond is less than its par value.

c. The bonds will be issued at a discount, i.e Jones Company will receive less than the par value of $ 490,000 for the bonds. This is because the market interest rate of 12 % exceeds the coupon rate of 9 % on the bonds.

2. If the bonds are issued at 89, the price of the bonds = $ 490,000 x 89 % = $ 436,100.

3. Jones will pay $ 490,000 x 9 % = $ 44,100 in interest each year.

If the bonds are issued at 89, the interest expense for the first year = Annual coupon + Amortization of bond discount = $ 44,100 + [ $ 490,000 - 436,100 ] / 5 = $ 54,880

E 12 -23 :

In the books of Daughtry Limited :

Requirement	Date	General Journal	Debit	Credit
			$	$
1.	June 30	Cash ( $ 130,000 x 86 % )	111,800
		Discount on Bonds Payable	18,200
		Bonds Payable		130,000
		To record issuance of bonds
2.	December 31	Interest Expense	5,655
		Discount on Bonds Payable [ $ 18,200 / ( 20 x 2 ) ]		455
		Cash ( $ 130,000 x 8 % x 1/2 )		5,200
		To record semiannual interest payment and amortization of bond discount

E 12 - 25:

In the books of Roberts Unlimited:

Requirement	Date	Account Titles	Debit	Credit
			$	$
1.	January 1, 2018	Cash ( $ 240,000 x 104 % )	249,600
		Premium on Bonds Payable		9,600
		Bonds Payable		240,000
2.	June 30, 2018	Interest Expense	9,360
		Premium on Bonds Payable [ $ 9,600 / ( 20 x 2 ) ]	240
		Cash ( $ 240,000 x 8 % x 1/2 )		9,600
3.	December 31, 2018	Interest Expense	9,360
		Premium on Bonds Payable	240
		Cash		9,600
4.	January 1, 2038	Bonds Payable	240,000
		Cash		240,000

E 12 - 26 :

1. Bond issue price = $ 600,000 x 94 % = $ 564,000

Discount on bonds payable = $ 600,000 - $ 564,000 = $ 36,000.

Annual discount amortization = $ 36,000 / 15 = $ 2,400.

Carrying value of the bonds as on July 31, 2021 = $ 600,000 - $ ( 36,000 - 2,400 x 3 ) = $ 571,200.

2. In the books of CoastalView Magazine:

Date	Account Titles	Debit	Credit
		$	$
July 31, 2021	Bonds Payable	600,000
	Loss on Bond Retirement	34,800
	Discount on Bonds Payable		28,800
	Cash ( $ 600,000 x 101 % )		606,000