1. How much is the amortization of discount for 2021?2. How much is the carrying value of the bonds payable as of December 31, 2021? In connection of your audit of the liabilities of Cring-Cring Company, you noted that on December 31, 2020. Thecompany issued P2, 000,000 8% serial bonds. To be repaid in the amount of P400,000 each year. Interest is payableannually on December 31. The bonds were issued to yields 10% a year. The bond proceeds were P1,902,800 based onthe present value at December 31, 2020 of five annual payments as follows:PrincipalP400,000400,000400,000400,000400,000Due datesInterest12/31/2112/31/2212/31/2312/31/2412/31/25P160,000128,00096,00064,00032,000The company uses the effective method in amortizing bond premium or discount.

Bonds are a form of debt or liability for the business, on which regular interest payments needs to…

Answered: 1. How much is the amortization of…

1. How much is the amortization of discount for 2021? 2. How much is the carrying value of the bonds payable as of December 31, 2021?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 2PA: On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The...

See similar textbooks

Related questions

Q: A company issues $14900000, 5.8%, 20-year bonds to yield 6% on January 1, 2019. Interest is paid on…

A: Bonds are a form of loan or debt that is taken by the business. When bonds are being sold at a value…

Q: A bond issued by a corporation on May 1, 1999, is scheduled to mature on May 1, 2019. If today is…

A: Details given are : Bond issue date = May 1 , 1999 Bond Maturity date = May 1 , 2019 Today's date =…

Q: What is the amount of bond interest expense for the first year?

A: Solution: Bond interest expense for first year = Interest expense for first semiannual period +…

Q: On January 1, 2020, MNOCompany issued its 9%, P2 million bonds, which mature on January 1, 2030. The…

Q: According to the theory, premium bonds, discount bonds, and face value bonds at the expiry date will…

A: Bonds refer to borrowing security issued by the company to raise funds from the market by making an…

Q: Required: Determine the price of the bonds at January 1, 2021. (Enter your answer in whole dollars.)…

A: Issuance of bonds is one of the sources of financing, bonds are long-term debt for the company…

Q: On January 1, 2019, Learned Inc. issued $105 million face amount of 20-year, 14% stated rate bonds…

A: Proceeds (Issue price) of bonds=Present value of semiannual interest payment+Present value of…

Q: Q7

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from…

Q: On January 02, 2020, ABC Company issued its 9% bonds in the face amount of P4,000,000 which mature…

A: Total interest expense for the year = the carrying amount of the bonds × the effective rate (yield)…

Q: On January 1, 2020, Junibond issued 5-year 10%, P10,000,000 for P10,246,744. Interest and principal…

A: Amount of Annual installments = Issue value of the bonds / Present value factor at yield rate…

Q: What is the carrying amount of the bonds payable on December 31, 2020? a. 4,000,000 b. 4,500,000 c.…

A: Bonds payable are a debt instrument which are issued by the company for raising long-term capital…

Q: How much is initial valuation of the bonds? How much cash was received upon the sale of the bonds?…

A: Accrued Interest can be defined in simple terms as an interest which has been occurred at a…

Q: (a) Prepare the jounal entry at the date of the bond purchase. Date Account Debit Credit (b) Prepare…

A: When the Bond Investment is classified as held for maturity it is required to be accounted under the…

Q: On January 1, 2020, $2220000, 10-year, 10% bonds, were issued for $2126000. Interest is paid…

A: Amortization is a process of writing off the value of an asset during its life time gradually.

Q: A company issues $15100000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on…

A: It is the financial instrument issued by the company to raise the fund for business operations.…

Q: Calculate the quoted price on June 1, 2011 of the bond outlined below. (Assume that the face value…

A: Given: Particulars Amount Face value $100 Coupon rate 5.0% Market rate 5.80% Maturity…

Q: On April 1, 2020, BANANA Company purchased 9% bonds with a face value of ₱4,000,000 for ₱3,756,000…

A: Interest refers to the cost of money borrowed from a lender. It can be simple or compound. It is…

Q: How much interest will Flamengo pay to the bondholders on December 31 2022?

A: It is pertinent to note that the current price or value of bond is the present value of all cash…

Q: A company issues $14600000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on…

A: The carrying value of the bond using effective interest will be proceeds from the issue with…

Q: A bond issued by a corporation on June 15, 2007, is scheduled to mature on June 15, 2017. If today…

A: In this question we need to compute the bond's time to maturity.

Q: When the interest payment dates of a bond are May 1 and November 1, and a bond is purchased on June…

A: Interest is the term which is defined as the monetary charge for borrowing the money usually…

Q: On February 1, 2023, what was the value of a P7,000, bond with 5% compounded semiannually due on…

A: Here,

Q: (includes accrued interest). Give entries through December 1, 2022. Prepare a bond amortization…

A: Bonds are an agreement between an investor and investee.

Q: On June 30, 2021, Moran Corporation issued $13.5 million of its 6% bonds for $12.1 million. The…

Q: On September 1, 2021, ETC Company received P1,032,880 for P1,000,000 face amount, 12% bonds, a price…

A: If the issue price of a bond exceeds its face value then the bond is said to be issued at a premium.

Q: How much is the estimated purchase price of the bonds on January 1, 2021?

A: The purchase price of the bond reflects the relationship between coupon interest rate and market…

Q: at is the total carrying value of the investment in bonds at year end 2020?

A: Carrying Value: Carrying value is the measure used in accounting , in which the value of the assets…

Q: A company issues $17200000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on…

Q: 2 of the VLN, how do you determine the annuity cash flow (the bond interest payment) from an annual…

A: Interest payment annual cash flows which is paid to the bond holders regularly till bonds are…

Q: Please answer following true or false with explanation i am providing 3 subparts (A) A bond was…

A: Bond is the debt to the company who has issued it, this is the instrument which is issued to the…

Q: On January 1, 2021, an investor paid OR291, 000 for bonds with a principal amount of OR300,000. The…

A: The interest income refers to the amount earned by the company on the amount lent aside from the…

Q: 1. Determine the carrying amount of the bonds payable on December 31, 2021. The interest method of…

A: Interest Method of amortizing Bond Discount Under this method, Bond discount is amortized using the…

Q: On January 1, 2020, ABC Company issued its 9%, P2 million bonds, which mature on January 1, 2030.…

A: Date Account Titles & Explanation Debit Credit January 1, 2020 Cash P18,78,000…

Q: Required a) Explain, including calculations, how the issue of the bond would be accounted for by…

A: On 1st January 2021 Corgi Ltd. issued bonds of £5 million at par value, the bonds are redeemable on…

Q: On December 31, 2021, Interlink Communications issued 6% stated rate bonds with a face amount of…

A: Price of the bond: Price of the bond is the present value of the amount to be paid after end of the…

Q: On December 31, 2021, Interlink Communications issued 8% stated rate bonds with a face amount of…

A: n= 30 years i= 9% Cashflow Amount Present value factor@9% Present value Interest…

Q: A. How much are the proceeds that Shanghai Fashions Company will receive on the issue date of the…

A: A. Time Payments 0.5 325,000*0.03 =9,750 (Semiannual coupon payments) 1 9,750 1.5 9,750…

Q: On January 1, 2019, $40 million face amount of 5%, 20-year bonds were issued. The bonds pay interest…

A: Bond is issued by the companies in order to raise fund. The bondholders receive a fixed amount of…

Q: n January 1, 2019, Mitsubishi Company issued its 9% P9,000,000 face value bonds, which matures on…

A: Solution: Discount on bond payable, Jan 1 , 2019 = face value - issue price = 9000000 - 8451000 =…

Q: $400,000 is issued of 8-year, 4% bonds at par on January 1, 2022. The bonds pay interest annually.…

A: The company issued the bond for the purpose of raising money from outsiders, for this company has to…

Q: t December 31, 2020, Martinez Corporation has the following account balances: Bonds payable, due…

A: Bonds payable: Bonds payable is a liability to the company created upon the issue of bonds either at…

Q: On January 1, 2021, Jackie Company issued 2,000 P5,000 8% five-year bonds at 90.35 when the market…

A: "Since you have posted a question with multiple sub parts, we will solve first three sub parts for…

Q: A company issues $16700000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on…

A: Bond is type of a debt security which is generally issued by corporates or government to arrange…

Q: On September 31, 2021, an entity issues bonds with face amount of P8,000,000 for P9,105, 022…

A: Cash proceeds P9,105,022 Accrued Interest (P8,000,000 *9 /12 * 9%) (P540,000) Face Value of…

Q: On July 1, 2019, Pen Co. issued 4,000 of its 8%, P1,000 face value bonds payable for P3,504,000. The…

A: Introduction: Bonds discount: When bonds are issued at less than its face value called bonds…

Q: What is the journal entry to record issuance of the bonds on January 1, 2019? Dr. Cash, P500,000…

A: If the Bonds are issued at less then face value the the bonds are discount bonds.

Q: In what section of the balance sheet would a bond payable be reported if (a) it is payable within…

A: Bonds: Bonds are debts instruments issued by corporates. Bonds are issued at par, premium and…

Q: Temptation Vacations issues $60 million in bonds on January 1, 2021, that pay interest semiannually…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Question

1. How much is the amortization of discount for 2021?

2. How much is the carrying value of the bonds payable as of December 31, 2021?

In connection of your audit of the liabilities of Cring-Cring Company, you noted that on December 31, 2020. The
company issued P2, 000,000 8% serial bonds. To be repaid in the amount of P400,000 each year. Interest is payable
annually on December 31. The bonds were issued to yields 10% a year. The bond proceeds were P1,902,800 based on
the present value at December 31, 2020 of five annual payments as follows:
Principal
P400,000
400,000
400,000
400,000
400,000
Due dates
Interest
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
P160,000
128,000
96,000
64,000
32,000
The company uses the effective method in amortizing bond premium or discount.

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Similar questions

On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $1,000 for $104,000. The bonds had a stated rate of 6% and paid interest semiannually. What is the journal entry to record the issuance of the bonds?
Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received $540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium
On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $1,000 for $104,000. The bonds had a stated rate of 6% and paid interest semi-annually. What is the journal entry to record the first payment to the bondholders?
On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000 are to be made annually. If the company received proceeds of $112,300, how would the bonds issuance be quoted? A. 1.123 B. 112.30 C. 0.890 D. 89.05
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?
Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of discount D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of discount
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000