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
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.
Boyd Co. produces and sells aviation equipment. On the first day of its fiscal year, Boyd issued $83,000,000 of five-year, 8% bonds at a market (effective) interest rate of 10%, with interest payable semiannually. This information has been collected in the Microsoft Ex
Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
Compute the following:
A. The amount of cash proceeds from the sale of the bonds. Round your answer to the nearest dollar.
$4
B. The amount of discount to be amortized for the first semiannual interest payment period, using the interest method. Round your answer to the nearest dollar.
C. The amount of discount to be amortized for the second semiannual interest payment period, using the interest method. Round your answer to the nearest dollar.
D. The amount of the bond interest expense for the first year. Round your answer to the nearest dollar.
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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