Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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Chapter 11, Problem 1R
The University Club recently issued $1,500,000 of 10-year, 9% bonds at an effective interest rate of 10%. Bond interest is payable annually.
You have been asked to calculate the issuance price of the bonds and prepare amortization schedules for any discount or premium. The worksheet BONDS has been provided to assist you. Note that the worksheet contains a scratch pad at the bottom that has been preprogrammed to automatically compute and display the relevant cash flows needed for
Expert Solution & Answer
To determine
Calculate the issue price of bonds and prepare amortization schedules for any discount or premium.
Explanation of Solution
Calculate the issue price of bonds and prepare amortization schedules for any discount and premium.
Table (1)
The formulae for the above calculation are as follows:
Figure (2)
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For each of the following three examples, provide the journal entry that the company would
make on the date the bonds are issued. Note that you will need to do a present value
calculation to determine the cash proceeds from each bond issue. You can round your answer
to the nearest dollar.
1. Andersson Inc. issues 8-year bonds with a face value of $50,000,000 and a stated annual
interest rate of 6%. The bonds pay interest semiannually on June 30 and December 31. The
annual market rate of interest on the date of issue is 8%.
Some of the questions are in the screenshots to make it easier!
The following section is taken from Ohlman Corp.’s balance sheet at December 31, 2018.
Current liabilities
Interest payable
$ 112,000
Long-term liabilities
Bonds payable, 7%, due January 1, 2021
1,600,000
Bond interest is payable annually on January 1. The bonds are callable on any interest date.(a)Journalize the payment of the bond interest on January 1, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bonds have
a carrying value of $990,000. We call these bonds prior to maturity on September 30.
Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in
the debit or credit columns.
View transaction list
Journal entry worksheet
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require
the payment of a call premium of $10,000. The bonds have a carrying value of
$990,000. We call these bonds prior to maturity on September 30.
Note: Enter debits before credits.
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Chapter 11 Solutions
Excel Applications for Accounting Principles
Ch. 11 - The University Club recently issued 1,500,000 of...Ch. 11 - The bond pricing formula utilizes the NPV (Net...Ch. 11 - Prob. 3RCh. 11 - Prob. 4RCh. 11 - Use the worksheet to compute the bond issue price...Ch. 11 - Use the worksheet to compute the bond issue price...Ch. 11 - Prob. 7RCh. 11 - a. Reset the Data Section to its initial values....
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