Question

On 1 January 2013, Mary Inc issues $1,000,000 face value, 10-year bonds with annual interest rate...

On 1 January 2013, Mary Inc issues $1,000,000 face value, 10-year bonds with annual interest rate of 5% to be paid each 31 December. The market interest rate is 4%.

Using the effective interest rate method of amortization, Mary Inc should record when it closes its annual book on Dec 31, 2015

Group of answer choices

a carrying amount of 1,081,109 on Dec 31, 2015

an interest expense of 42,974 on Dec 31, 2015

a cash disbursement of 43,244 on Dec 31, 2015

a carrying amount of 1,060,021 on Dec 31, 2015

an amortization of discount of 7,307 on Dec 31, 2015

0 0
Add a comment Improve this question Transcribed image text
Answer #1
A carrying amount of 1,060,021 on Dec 31, 2015
Option D is correct
Workings:
Amount PV factor 4% Present value
Cash Annual interest 50000 8.11090 405545
Principal 1000000 0.67556 675564
Total 1081109
Cash annual interest Interest expense 4% Premium amortized Carrying value
January 01, 2013 1081109
December 31, 2013 50000 43244 6756 1074353
December 31, 2014 50000 42974 7026 1067327
December 31, 2015 50000 42693 7307 1060021
Interest expense 4%:
December 31, 2013 43244 =1081109*4%
December 31, 2014 42974 =1074353*4%
December 31, 2015 42693 =1067327*4%
Add a comment
Know the answer?
Add Answer to:
On 1 January 2013, Mary Inc issues $1,000,000 face value, 10-year bonds with annual interest rate...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
  • On January 1, 2018, White, Inc. issues $1,000,000 total face value, 10-yr bonds with an annual...

    On January 1, 2018, White, Inc. issues $1,000,000 total face value, 10-yr bonds with an annual stated interest rate of 5%. Interest is paid semi-annually on June 30th and December 31st. The company received $559,260 upon issuance. (Solutions posted online) Period Cash Paid Interest Expense Amortization of Discount/Premium Unamortized Premium/Discount Bonds Carrying Value (Book Value) Issuance Don’t use Don’t use Don’t use 6/30/2018 12/31/2018 6/30/2019 Are the bonds issued at a premium, a discount, or at face value? What is...

  • On January 1, 2018, White, Inc. issues $1,000,000 total face value, 10-yr bonds with an annual...

    On January 1, 2018, White, Inc. issues $1,000,000 total face value, 10-yr bonds with an annual stated interest rate of 5%. Interest is paid semi-annually on June 30th and December 31st. The company received $559,260 upon issuance. The chart below may help, but will not be graded. (Solutions included below; Need Steps to get to the answers) Period Cash Paid Interest Expense Amortization of Discount/Premium Unamortized Premium/Discount Bonds Carrying Value (Book Value) Issuance Don’t use Don’t use Don’t use 6/30/2018...

  • On January 1, 2020, Kingbird, Inc. issued $2,680,000 face value, 12%, 10-year bonds at $2,534,577. This price resulted...

    On January 1, 2020, Kingbird, Inc. issued $2,680,000 face value, 12%, 10-year bonds at $2,534,577. This price resulted in an effective-interest rate of 13% on the bonds. Kingbird uses the effective interest method to amortize bond premium or discount. The bonds pay annual interest on January 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account...

  • Problem 10-12A On January 1, 2019, Windsor, Inc. issued $2,280,000 face value, 8%, 10-year bonds at...

    Problem 10-12A On January 1, 2019, Windsor, Inc. issued $2,280,000 face value, 8%, 10-year bonds at $2,133,677. This price resulted in an effective-interest rate of 9% on the bonds. Windsor uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest on January 1. Your answer is partially correct. Try again. Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Credit account titles are automatically indented when amount is entered....

  • Stanford Issues bonds dated January 1, 2017, with a par value of $240,000. The bonds' annual...

    Stanford Issues bonds dated January 1, 2017, with a par value of $240,000. The bonds' annual contract rate is 9%, 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 12%, and the bonds are sold for $222,307. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond Interest expense will be recogned over the...

  • On January 1, 2019, Wildhorse Co. issued $2,360,000 face value, 7%, 10-year bonds at $2,201,642. This...

    On January 1, 2019, Wildhorse Co. issued $2,360,000 face value, 7%, 10-year bonds at $2,201,642. This price resulted in an effective-interest rate of 8% on the bonds. Wildhorse uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest on January 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation...

  • 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...

  • Norcal issued five-year 7% bonds with a face value of $100,000, for $96,567.94 on January 1, Year 1 when the market effe...

    Norcal issued five-year 7% bonds with a face value of $100,000, for $96,567.94 on January 1, Year 1 when the market effective rate of interest was 7.5%. The bonds pay annual interest each December 31. Stanton uses the effective interest method for amortization of premium or discount on bonds payable. Required: a) What is the annual amount of cash that Stanton will pay to bondholders for interest? b) What amount of interest expense and discount amortization should Stanton recognize for...

  • Stanford issues bonds dated January 1, 2019, with a par value of $249,000. The bonds' annual...

    Stanford issues bonds dated January 1, 2019, with a par value of $249,000. 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 12%, and the bonds are sold for $236,765. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the...

  • 19.  _____% BAD Company issues 9%, 10-year bonds with a face amount of $1,000,000 on January 1,...

    19.  _____% BAD Company issues 9%, 10-year bonds with a face amount of $1,000,000 on January 1, 20A for $1,000,000. Interest is paid semiannuallyon June 30 and December 31.  What was the market interest rate for the bond issuance?

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
Active Questions
ADVERTISEMENT