ZuoTi.Pro
Question

22. On January 1, 2019, a company issued $400,000 of 10-year, 12% bonds. The interest is payable semiannually on June 30 and
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer is D.

At the date of sale of bonds, market interest rate was 10% which is less than the coupon rate of 12%.
Issue price of bonds was higher than the par value of bonds at the time of sale. The book value of the bonds will decrease to reach the par value at the time of maturity.
Interest expense will decrease as the bond reaches maturity because the book value of bonds will decrease which will lead to decrease in interest expense.
As interest expenses deceases, the amortization of premium on bonds payable will increase as the bond matures.

Therefore, only Option D is incorrect.

0 0
Add a comment
Know the answer?
Add Answer to:
22. On January 1, 2019, a company issued $400,000 of 10-year, 12% bonds. The interest is...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • McNeil Corporation issued $800,000 of 12%, 10-year bonds payable on January 1, 2019. The market interest...

    McNeil Corporation issued $800,000 of 12%, 10-year bonds payable on January 1, 2019. The market interest rate at the date of issuance was 10%, and the bonds pay interest semiannually (on June 30 and December 31). McNeil Corporation's year-end is June 30. Read the requirements. 1. Using the PV function in Excel", calculate the issue price of the bonds. (Round your answer to the nearest whole dollar.) The issue price of the bonds is $ í Requirements 1. Using the...

  • Waldron Corporation issued $350,000 of 12%, 10-year bonds payable on January 1, 2019. The market interest...

    Waldron Corporation issued $350,000 of 12%, 10-year bonds payable on January 1, 2019. The market interest rate at the date of issuance was 10%, and the bonds pay interest semiannually on June 30 and December 31). Waldron Corporation's year and is June 30, Waldron prepared an effective interest amortization table for the bonds through the first three interest payments as follows: Click the icon to view the amortization schedule) Read the requirements 1. How much cash did Waldron Corporation borrow...

  • On January 1, 2019, a company issued $400,900 of 10-year, 12% bonds. The interest is payable...

    On January 1, 2019, a company issued $400,900 of 10-year, 12% bonds. The interest is payable semi-annually on June 30 and December 31. The issue price was $415,403 based on a 10% market interest rate. The effective-interest method of amortization is used. Rounding all calculations to the nearest whole dollar, what is the interest expense for the six-month period ending June 30, 2019? Multiple Choice 0 $20,770. $20,770. 0 $24,054. $24,054. o $20,045. o $24,924.

  • On January 1, 2015, Stronger Industries issued $480,000 of 9%, five-year bonds that pay interest semiannually...

    On January 1, 2015, Stronger Industries issued $480,000 of 9%, five-year bonds that pay interest semiannually on June 30 and December 31. They are issued at $499,483 and their market rate is 8% at the issue date. After recording the entry for the issuance of the bonds, Bonds Payable had a balance of $480,000 and Premium on Bonds Payable had a balance of $19,483. Stroger uses the effective interest bond amortization method. The first semiannual interest payment was made on...

  • On January 1, 2019, Bishop Company issued 8% bonds dated January 1, 2019, with a face...

    On January 1, 2019, Bishop Company issued 8% bonds dated January 1, 2019, with a face amount of $20 million. The bonds mature in 2028 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. Determine the price of the bonds at January 1, 2019. Show computations Prepare the journal entry to record the bond issuance by Bishop on January 1, 2019. Prepare the journal entry...

  • 12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest....

    12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest. When Eaton issued the bonds, the market rate of interest was 10 %. Which of the following statements is incorrect? a) The bonds were issued at par. b) Annual interest expense will equal the company's annual cash payments for interest. The book value of the bonds will decrease as cash interest payments are made. c) d) Annual interest expense is the same regardless of...

  • 1. On January 1, Year 1, Price Co. issued $393,000 of five-year, 6 percent bonds at...

    1. On January 1, Year 1, Price Co. issued $393,000 of five-year, 6 percent bonds at 95. Interest is payable annually on December 31. The discount is amortized using the straight-line method.    Required Prepare the journal entries to record the bond transactions for Year 1 and Year 2. - Record the entry for issuance of bonds -Record the entry for recognizing interest expense on Dec. 31, Year 1 -Record the entry for recognizing interest expense on Dec. 31, Year...

  • On January 1, 2019, Lagune & Sons issued 9% bonds dated January 1, 2019, with a...

    On January 1, 2019, Lagune & Sons issued 9% bonds dated January 1, 2019, with a face amount of $200,000. The bonds mature in 20 years. The effective interest rate for these bonds was 10%. Interest is paid semiannually on June 30 and December 31. Lagune’s fiscal year is the calendar year. 1. Calculate the issue price of the bond. Show the calculation. 2. Prepare an amortization schedule for the first year of the bond. 3. Prepare the necessary entries...

  • On January 1, 2019, Rodgers Company purchased $400,000 face value, 10%, 3-year bonds for $390,009.00, a...

    On January 1, 2019, Rodgers Company purchased $400,000 face value, 10%, 3-year bonds for $390,009.00, a price that yields a 11% effective annual interest rate. The bonds pay interest semiannually on June 30 and December 31. Required: 1. Record the purchase of the bonds. 2. Prepare an investment interest income and discount amortization schedule using the effective interest method. 3. Record the receipts of interest on June 30, 2019, and June 30, 2021.

  • On January 1, Year 1, Acorn Financial Corp. issued 825 convertible bonds. Each $1,000 face value...

    On January 1, Year 1, Acorn Financial Corp. issued 825 convertible bonds. Each $1,000 face value bond is convertible into five shares of common stock. The bonds have a 10-year term to maturity and pay interest semiannually. Acorn's common stock has a par value of $20.00 per share. The bonds have a stated interest rate of 4% and pay interest semiannually. The convertible bonds were sold for $875,500. Bond issue costs of $50,000 will be subtracted from the bond sale...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT