Reference no: EM131880705
Question: On 1/1/2001, ABC Co. issued $1,000,000 5-year bonds with a market rate of 8%. Interests are paid annually on 12/31. The coupon rate is 5%. Answer the following questions assuming that the company uses the effective interest method of amortization. Show your calculations.
1. Determine the selling price of the bond on the issue date. Is it issued at a premium or discount?
2. Give the journal entry to record the bond issuance above.
3. How much is the interest expense for ABC Co. for the fiscal year that ended 12/31/2001? Give the journal entry to record the interest expense.
4. What is the net borrowing (i.e., book value of bond) by ABC Co. as of 12/31/2001 after making the first coupon payment?
5. On 1/1/2003, ABC Co. found itself with a lot of excess cash and it will be best for them to buy back their bonds from the open market and retire them so as to avoid future interest payments. The market interest rate on 1/1/2003 is 9%.
Calculate: (i) the cash amount that ABC has to pay to retire the bond
(ii) the book value (i.e., net borrowing) of the bonds on 1/1/2003
(iii) gain/loss from the retirement
(iv) provide the journal entry for the early retirement of bonds.
What is the amount and character recognized by wilma
: What is the amount and character (capital gain or dividend) recognized by Wilma as a result of the stock redemption
|
What implicit assumption provides a shortcut in situation
: In which do you have to make more assumptions? Why? What implicit assumption provides a shortcut in one situation?
|
Will cost of production labor appear to be fixed or variable
: A Dunkin' Donuts franchise owner hires a baker to prepare donuts each morning. One baker works Monday through Friday, another works weekends.
|
Why is planning for a new business harder
: Why is planning for a new business harder than planning for an established operation? In which do you have to make more assumptions? Why?
|
Determine the selling price of the bond on the issue date
: On 1/1/2001, ABC Co. issued $1,000,000 5-year bonds with a market rate of 8%. Interests are paid annually on 12/31. The coupon rate is 5%.
|
Prepare any necessary adjusting journal entries at december
: Prepare any necessary adjusting journal entries at December 31, 2013, pertaining to each item of other information (a-d)
|
What is the acquisition date excess fair value
: At 1/1/15, Pirate Company acquired 80 % of Sissy Company for $ 425,000. At that date, the fair value of the 20 % noncontrolling interest was $ 102,500.
|
Identify an important concept or insight about globalization
: In your response paper, identify an important new concept, theory, or insight about globalization from Steger Chap. 3 Economic dimension of globalization.
|
Purpose of signifigane levels in elementary statistics
: What is the purpose of signifigane levels in elementary statistics?
|