Chapter 10: Q10QS (page 474)
On January 1, 2017, the \(2,000,000 par value bonds of Spitz Company with a carrying value of \)2,000,000 are converted to 1,000,000 shares of $1.00 par value common stock. Record the entry for the conversion of the bonds
The value of common stock is $1,000,000
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Enter the letter of the description A through H that best fits each term or phrase 1 through 8.
A. Records and tracks the bondholders’ names.
B. Is unsecured; backed only by the issuer’s credit standing.
C. Has varying maturity dates for amounts owed.
D. Identifies rights and responsibilities of the issuer and the bondholders.
E. Can be exchanged for shares of the issuer’s stock.
F. Is unregistered; interest is paid to whoever possesses them.
G. Maintains a separate asset account from which bondholders are paid at maturity.
H. Pledges specific assets of the issuer as collateral.
1. Registered bond 5. Convertible bond
2. Serial bond 6. Bond indenture
3. Secured bond 7. Sinking fund bond
4. Bearer bond 8. Debenture
Citywide Company issues bonds with a par value of $150,000 on their stated issue date. The bonds mature in five years and pay 10% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 8%.
1. What is the amount of each semiannual interest payment for these bonds?
2. How many semiannual interest payments will be made on these bonds over their life?
3. Use the interest rates given to determine whether the bonds are issued at par, at a discount, or at a premium.
4. Compute the price of the bonds as of their issue date.
5. Prepare the journal entry to record the bonds’ issuance
Refer to the bond details in Problem 10-4B.
Required
Sylvestor Company issues 10%, five-year bonds, on December 31, 2016, with a par value of \(100,000 and semiannual interest payments. Use the following bond amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2016; (b) the first interest payment on June 30, 2017; and (c) the second interest payment on December 31, 2017
Semiannual Period-End | Unamortized Discount | Carrying Value |
12/31/2016 | \) 7,360 | \( 92,640 |
6/30/2017 | \) 6,624 | \( 93,376 |
12/31/2017 | \) 5,888 | $ 94,112 |
On October 1, 2017, Gordon borrows \(150,000 cash from a bank by signing a three-year installment note bearing 10% interest. The note requires equal payments of \)60,316 each year on September 30.
Required
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