Chapter 10: Q15DQ (page 473)
Question: Refer to the statements for Samsung in Appendix A. By what amount did Samsung’s long-term borrowings increase or decrease in 2015?
Answer
Net decrease in long-term borrowings equals $1,608,991 (In millions of Korean won)
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Dobbs Company issues 5%, two-year bonds, on December 31, 2017, with a par value of \(200,000 and semiannual interest payments. Use the following bond amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2017; (b) the first through fourth interest payments on each June 30 and December 31; and (c) the maturity of the bonds on December 31, 2019.
Semiannual Period-End | Unamortized Discount | Carrying Value |
12/31/2017 | \) 12,000 | \( 188,000 |
6/30/2018 | \) 9,000 | \( 191,000 |
12/31/2018 | \) 6,000 | \( 194,000 |
6/30/2019 | \) 3,000 | \( 197,000 |
12/31/2019 | - | \) 200,000 |
Question: What is the main difference between a bond and a share of stock?
Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 5%, which implies a selling price of 1233⁄8. The straight-line method is used to allocate interest expense.
1. What are the issuer’s cash proceeds from issuance of these bonds?
2. What total amount of bond interest expense will be recognized over the life of these bonds?
3. What is the amount of bond interest expense recorded on the first interest payment date?
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
Madrid Company plans to issue 8% bonds on January 1, 2017, with a par value of \(4,000,000. The company sells \)3,600,000 of the bonds at par on January 1, 2017. The remaining $400,000 sells at par on July 1, 2017. The bonds pay interest semiannually as of June 30 and December 31.
1. Record the entry for the first interest payment on June 30, 2017.
2. Record the entry for the July 1 cash sale of bonds.
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