13) Shug Jordan Co has bonds with a face value of $150,000 selling at 101. The b
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13) Shug Jordan Co has bonds with a face value of $150,000 selling at 101. The bonds paid each quarter. The stated rate on the bonds is 9%. The Market rate on Co's total cost of borrowing? have a S year life with interest is Shug Jordan the bonds is 8%. What a. 270,000 b. 268,500 c. 271,500 d. 300,000 14) On January 1, 2015, Kerry Co issued bonds with a face value of $4,000,000 at 102. The bonds have a 10 year life and interest is paid semiannually. The interest rate on the bonds was 7% with amount of the premlum is unamortized on December 31, 2017 market rate of 5%, what a. 56,000 b 24,000 ?. 80,000 d 78,000 15) Which of the following is not a step involved in retirement of bonds before maturity? a. Accounting for gain/loss b. Update Call Price of Bond c. Update Carrying Value of bond d. Compare Call Price to Carrying Value 16) Unamortired discounts on bonds payable should be reported on the balance sheet of the issuer as: a. b. c. d. Direct deduction from the face amount of the debt Direct deduction from the present value of the debt Deferred charge Part of issuance cost 17) Shug Jordan Co issued $500,000 bonds with an 10-year life on January 1", 2012.The stated rate on these bonds annual interest on December 31".Assuming that Shug lordan Co retires the bonds on December 31, callable on Dec 31, 2015, at 104.The is 10%. The selling price of these bonds was $550,000. These bonds are would it be? 2016, would they have a gain or a loss, and what amount Loss of 10,000 b. Gain of 10,000 c Loss of 5,000 d. Gain of 5,000 18) At maturity, the carrying value of the bond wiequat: a. b. e. d. The amount of the Selling Price Face Value None of the above 19) If bonds are selling at a discount, then periodic interest expense is a. Equal to the interest paid b. Greater than interest paid c. Less than interest paid d. Amortized throughout the life of the bond 20) Which of the following is not true about a journal entry to record early retirement of bonds? a. Debit to Bonds Payable for callable amount b. Debit a Loss on Retirement e. Credit to a discount on bonds payable d. Credit to Cash for callable amount at par on January 1" with an interest rate of 10% The life of the bonds is 21) Shug Jordan Co issued $210,000 bonds 7 years and interest is paid semilannualily. Prepare the journal entry to record the first interest payment: Interest Expense b. Interest Expense e. Interest Expense 18,900 d. Interest Expense CashExplanation / Answer
13)c.$271,500
The total cost of borrowing for a given bond issuance includes the interest payments plus redemption value of bond. When interest is paid quarterly, each interest payment equal the bonds' face value multiplied by the contractual interest rate x 3/12 (i.e., $150,000 x 9% x 3/12 = $3,375). for the whole year interest would be $3,375 x 4 quarters =$13,500 . These five-year bonds pay $13,500 in each of the five years (i.e., $13,500 x 5 years = $67,500) plus maturity value of $150,000.thereforet total cost to firm would be $67,500+$150,000=$217,500
14)a.$56,000
Amortization per year = ($4,000,000 x 102 - 4,000,000 x 100)/10 years = $8,000 per year
Remaining premium after three years = $80,000 - (8,000 x 3) = $56,000
15)c.UPDATE CALL PRICE OF BOND , BECAUSE THE CALL PRICE OF BOND IS GENERALLY ANNOUNCED BY THE COMPANY WHICH NEEDS NO UPDATION
16)a.DIRECT DEDUCTION FROM FACE VALUE AMOUNT OF DEBT - When an unamortized bond discount is first recorded, there is a debit to cash in the amount of the cash received, a debit to the bond discount contra account in the amount of the discount, and a credit to the bonds payable account in the amount of the face value of the bonds issued.
17)i am not sure
18)c.face value. The carrying value of bonds at maturity always equals the par value.
19)a. equal to interest paid . whatever the condition be the bond trades on discount/premium/par, the interest does not change
20)a.debit bonds payable at callable amount.
The entry would be debit bonds payable at carrying amount
21)b.Interest expense...... 21,000
cash............................21000
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