Question

26. A company issues $15 8% on January 1, 2016. December 31. The proces Using straight-line amor $ $15,000,000, 7.8%, 20-year bond 2016. Interest is paid on June 30 and proceeds from the bonds are $14,703,108. e amortization, what is the carrying value of ne bonds on December 31, 2018? A) $14,752,672 B) $14,955,466 C) $14,725,374 D) $14,747,642 27. Feller Company issues $2 Company issues $20,000,000 of 10-year, 9% bonds on rch 1, 2017 at 97 plus accrued interest. The bonds are dated January 1, 2017, and pay interest on June 30 and December 31. What is the total cash received on the issue date? A) $19,400,000 B) $20,450,000 C) $19,700,000 D) $19,100,000 28. When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be A) decreased by accrued interest from June 1 to November 1. B) decreased by accrued interest from May 1 to June 1. increased by accrued interest from June 1 to November 1. D) increased by accrued interest from May 1 to June 1.

Answer 1

Answer 26: D . $14,747,642.

Explanation:

Discount on bound issued = $15,000,000 - $14,703,108 = $296,892.

Carrying amount of the bonds as on December 2018

= $14,703,108 + ($296,892 * 3/20)

= $14,703,108 + $44,534

= $14,747,642

Answer 26: C. $19,700,000.

Explanation:

Total cash received on the issue date = ($20,000,000 * 97 %) + ($20,000,000 * 9 % * 2/12)

= $19,400,000 + $300,000  

= .$19,700,000

Answer 27: D. increased by accrued interest from May 1 to June 1.

Explanation: When issuer sells the bonds , the amount received from sale of bonds also include the interest amount accrued but not due .In the given question , the cash received by issuer will  increased by accrued interest from May 1 to June 1.