How do you complete the bonds portion of the partial balance sheet? - Calulation

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How do you complete the bonds portion of the partial balance sheet?

- Calulations & Entry

Taylor Troutman Pr Home Insert Page Layout Formulas Data Review View Calibri (Body), 11 'A-Av =- Paste Merge& C 1 PARTIAL BALANCE SHEETS The company could issue $2,000,000 of long-term bonds, due in 4 years with a stated rate of interest, paid semiannually, of 4%. The market rate for similar debt is 6%. 10 12 13 14 15 16 17 20 21 23 25 The company could issue $1,500,000 of long-term bonds, due in 4 years with a stated rate of interest 29 paid semiannually, of 8%. The market rate for similar debt is 6%. dep'n financing options wor Project Information

Explanation / Answer

Partial Balance Sheets The company could issue $2,000,000 of long-term bonds due in 4 years with a stated rate of interest paid semi-annually , of 4%. The market rate for similar debt of 6% Since the stated rate of interest and the market rate of interest are the same, the bonds will sell at their face value or at par Date Particulars Debit Credit Jan 1 2017 Cash 2,000,000 Bonds Payable 2,000,000 (Issued $2,000,000 bonds payable at face value) Every six months (on June 30 and December 31) after the bonds are issued, interest of $40,000 ($2000,000 × 0.04 × 6/12) is paid Date Particulars Debit Credit Jun 30 2017 Interest Expense                  40,000 Cash          40,000 (Paid 6 months interest on Bond) The bond matured on December 31, 2018. At this time, the corporation will pay the face value to the bondholder. Date Particulars Debit Credit Dec 31 2018 Bonds Payable 2,000,000 Cash 2,000,000 (Paid bond principal at maturity date) XYZ Company Inc. Balance Sheet (Partial) December 31,2017 Long Term Liabilities Bonds Payable , 4% due December 31,2021 2,000,000 Current Liabilities Interest on Bonds payable                  40,000 The company could issue $1,500,000 of the long term bonds due in 4 years with a stated rate of interest paid semi-annually , of 8%. The Market rate for similar debt is 6% Since the stated rate of interest and the market rate of interest are the same, the bonds will sell at their face value or at par Date Particulars Debit Credit Jan 1 2017 Cash 1,500,000 Bonds Payable 1,500,000 (Issued $1,500,000 bonds payable at face value) Every six months (on June 30 and December 31) after the bonds are issued, interest of $40,000 ($1,500,000 × 0.08 × 6/12) is paid Date Particulars Debit Credit Jun 30 2017 Interest Expense                  60,000 Cash          60,000 (Paid 6 months interest on Bond) The bond matured on December 31, 2018. At this time, the corporation will pay the face value to the bondholder. Date Particulars Debit Credit Dec 31 2018 Bonds Payable 1,500,000 Cash 1,500,000 (Paid bond principal at maturity date) XYZ Company Inc. Balance Sheet (Partial) December 31,2017 Long Term Liabilities Bonds Payable , 4% due December 31,2021 1,500,000 Current Liabilities Interest on Bonds payable                  60,000 The company could issue 400,000 additional shares of $1par value common stock for $4per share. The company will begin paying a dividend to ALL the common shareholders of $0.12per share and this will continue into the future. XYZ Company Inc. Balance Sheet (Partial) December 31,2017 Stock holders Equity Common stock ($1par, 1,000,000 shares authoriszed 400,000 issued and outstanding               400,000 Dividend payable            48,000.00 ($0.12 per share for 400,000 shares)

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