5. On January 1, 20x1, Kindness Co. issued 3-year, 10%, P2,000,000 convertible bonds for P2,200,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value per share of P200. On issuance date, the prevailing market rate of interest for similar debt without a conversion feature was 12%. On December 31, 20x2, Kindness Co. retired all the bonds for P2,000,000. On retirement date, the current rate for similar debt instrument without a conversion feature was 11%. Requirement: Provide all the entries in 20x1 and 20x2.

5. On January 1, 20x1, Kindness Co. issued 3-year, 10%, P2,000,000 convertible bonds for P2,200,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value per share of P200. On issuance date, the prevailing market rate of interest for similar debt without a conversion feature was 12%. On December 31, 20x2, Kindness Co. retired all the bonds for P2,000,000. On retirement date, the current rate for similar debt instrument without a conversion feature was 11%. Requirement: Provide all the entries in 20x1 and 20x2.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...

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On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for $103,000. From this information, we know that the market rate of interest was ________. A. more than 7% B. less than 7% C. equal to 7% D. equal to 1.3%
On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date. Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was received upon issuance?
E On January 1, 20x1, Kindness Co. issued 3-year, 10%, P2.000,000 convertible bonds for P2,200,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value per share of P200. On issuance date, the prevailing market rate of interest for sinmilar debt without a conversion feature was 12%. On December 31, 20x2, Kindness Co. retired all the bonds for P2,000,000. On retirement date, the current rate for similar debt instrument without a conversion feature was 11%. Requirement: Provide all the entries in 20x1 and 20x2.
On June 30, 2019, King Company had outstanding 9%, P5,000,000 face value bonds maturing on June 30, 2024. Interest is payable semiannually every June 30 and December 31. On June 30, 2019, after amortization was recorded for the period, the unamortized bond premium and bond issue cost were P30, 000 and P50, 000, respectively. On that date, King Company acquired all its outstanding bonds on the open market at 98 and retired them. On June 30, 2019, what amount should King Company recognize as gain before tax on redemption of bonds?
On December 1, Y4, Boston Corp. issued $4,600,000 (par value), 12%, 5-year convertible bonds for $4,950,000. Interest is payable December 1 and June 1. If the bonds had not been convertible, they would have sold for $4,890,000. Bond premium/discount is amortized each interest period on a straight-line basis. Boston reports under IFRS. Boston’s fiscal year end is September 30. On June 1, Y6, 65% of these bonds were converted into 42,000 no par common shares. At that time shares were trading at $100 per share. Instructions a. Prepare the entry to record the issue of the bonds on December 1, Y4. b. Prepare the entry to record the conversion on June 1, Y6.
2. On January 1, 20x1, Faith Co. issued 1,000, P2,000, 12% bonds for P2,206,168. Principal is due on December 31, 20x3, while interest is due annually every year-end. Faith Co. incurred transaction costs of P106,694 on the issuance. The effective interest rates are 8% before adjustment for transaction costs and 10% after adjustment for transaction costs. Requirement: Provide the journal entries over the life of the bonds.
2. On January 1, 20X1, Toy inc. Issued $500,000 of convertible bonds. The bonds mature on December 31, 20X5, Interest is payable annually at 6.0% on December 31. The bonds are convertible at the investor's option at the rate of 20 common shares for each $1,000 bond. Similar bonds without the conversion option were selling for $475,000 at time of issuance. Transaction costs of $10,000 were incurred. Required Prepare the journal entry to record the issuance of the bonds.
On January 1, 20x1, Cat Co. issued $1 million par value bonds at 104. The bonds have a coupon rate of 8% (payable June 30 and December 31) and mature in 10 years. Bond issue costs of $5,000 were incurred on the sale Under the FASB's preferred effective interest method for all amortization, interest expense on June 30, 20x1 would be $39.116 138.794 O138,616 $38.406
On January 1, 20x1, ABC Co. issued 1,000, ₱4,000, 12%, 3-year bonds. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective interest rate is 10%. The bonds payable will be presented in the Dec 31, 20X2 balance sheet as:PV of P1 at 12% for 3n = . 71178 PV of P1 at 10% for 3n = .75131PV ordinary annuity at 12% for 3n = 2.40183 PV ordinary annuity at 10% for 3n = 2.48685 Current liability of 4,072,703 Current liability of 4,000,000 Non current liability of 4,000,000 Non current liability of 3,928,569
On January 1, 20x1, ABC Co. issued its 8%, ₱2,000,000 bonds. Principal is due on December 31, 20x3 but interest is payable annually on December 31. The effective interest rate is 10%. At December 31, 20x1, how much is interest expense on bonds payable?PV of P1 at 8% for 3n = . 79383 PV of P1 at 10% for 3n = .75131PV ordinary annuity at 8% for 3n = 2.57710 PV ordinary annuity at 10% for 3n = 2.48685 160,000 168,246 190,052 200,000