ACCT 302 Connect Homework 14 Bonds and Long Term Notes Assignment solutions complete answers

ACCT 302 Connect Homework 14 Bonds and Long Term Notes Assignment solutions complete answers 

 

Just put your values given and automatically provide answers for you!

 

A company issued 6%, 10-year bonds with a face amount of $90 million. The market yield for bonds of similar risk and maturity is 7%. Interest is paid semiannually. At what price did the bonds sell? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Enter your answer in whole dollars.)

 

On January 1, a company issued 10%, 15-year bonds with a face amount of $70 million for $64,912,925 to yield 11%. Interest is paid semiannually. What was interest expense at the effective interest rate on June 30, the first interest date? (Enter your answers in whole dollars. Round percentage answers to 1 decimal place (e.g., 0.0234 should be entered as 2.3).)

 

On January 1, a company issued 6%, 15-year bonds with a face amount of $60 million for $49,624,854 to yield 8%. Interest is paid semiannually. What was the interest expense at the effective interest rate on the December 31 annual income statement? (Enter your answers in whole dollars. Round your intermediate calculations to the nearest dollar amount.)

 

When Patey Pontoons issued 8% bonds on January 1, 2021, with a face amount of $620,000, the market yield for bonds of similar risk and maturity was 11%. The bonds mature December 31, 2024 (4 years). Interest is paid semiannually on June 30 and December 31. (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:
1. Determine the price of the bonds at January 1, 2021.
2. Prepare the journal entry to record their issuance by Patey on January 1, 2021.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2021.
5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2021?
6. What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2021? (Ignore income taxes.)
7. Prepare the appropriate journal entries at maturity on December 31, 2024.

 

On January 1, 2021, Gless Textiles issued $20 million of 9%, 20-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 10% of the issue as an investment.
 
Required:
1. Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century.
2. Prepare the journal entries for the June 30, 2025, interest payment by both Gless and Century assuming both use the straight-line method.
3. On July 1, 2026, when Gless’s common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method).

 

Federal Semiconductors issued 10% bonds, dated January 1, with a face amount of $820 million on January 1, 2021. The bonds sold for $754,210,889 and mature on December 31, 2040 (20 years). For bonds of similar risk and maturity the market yield was 11%. Interest is paid semiannually on June 30 and December 31. Federal determines interest at the effective rate. Federal elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $740 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2022 had risen to $746 million.
 
Required:

Complete the below table to record the following journal entries.
1. & 2. Prepare the journal entries to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2022, balance sheet. Federal determined that none of the change in fair value in 2021 was due to a decline in general interest rates and one-half of the increase in fair value in 2022 was due to a decline in general interest rates.

 

On January 1, 2021, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:
 

Payment
 
Cash
Payment
 
Effective
Interest
 
Increase in
Balance
 
Outstanding
Balance
 
 
 
 
 
 
 
 
 
6,978,029
 
1
 
261,000
 
279,121
 
18,121
 
6,996,150
 
2
 
261,000
 
279,846
 
18,846
 
7,014,996
 
3
 
261,000
 
280,600
 
19,600
 
7,034,596
 
4
 
261,000
 
281,384
 
20,384
 
7,054,980
 
5
 
261,000
 
282,199
 
21,199
 
7,076,179
 
6
 
261,000
 
283,047
 
22,047
 
7,098,226
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
~
 
38
 
261,000
 
338,343
 
77,343
 
8,535,913
 
39
 
261,000
 
341,437
 
80,437
 
8,616,350
 
40
 
261,000
 
344,650
 
83,650
 
8,700,000
 
 
 

Required:
1. What is the face amount of the bonds?
2. What is the initial selling price of the bonds?
3. What is the term to maturity in years?
4. Interest is determined by what approach?
5. What is the stated annual interest rate?
6. What is the effective annual interest rate?
7. What is the total cash interest paid over the term to maturity?
8. What is the total effective interest expense recorded over the term to maturity?

 

McWherter Instruments sold $610 million of 10% bonds, dated January 1, on January 1, 2021. The bonds mature on December 31, 2040 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $610,000 of the bonds as a long-term investment. (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:
1. Determine the price of the bonds issued on January 1, 2021.
2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2021.
3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2021 (at the effective rate).
4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2021 (at the effective rate).

 

At the beginning of 2021, VHF Industries acquired a machine with a fair value of $4,803,660 by issuing a three-year, noninterest-bearing note in the face amount of $6 million. The note is payable in  three annual installments of $2 million at the end of each year. (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:
1. What is the effective rate of interest implicit in the agreement?
2. to 4. Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount).
5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the journal entry to record the purchase of the machine.