Learning Materials
Features
Discover
Chapter 12: Q17RQ (page 655)
What does the debt to equity ratio show, and how is it calculated?
Debt to equity ratio measure the ability to pay debt by using the equity. It is the ratio of debt and equity.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Where is the current portion of notes payable reported on the balance sheet?
Determining the present value of bonds payable and journalizing
using the effective-interest amortization method
Brad Nelson, Inc. issued $600,000 of 7%, six-year bonds payable on January 1, 2018.
The market interest rate at the date of issuance was 6%, and the bonds pay interest
semiannually.
Requirements
1. How much cash did the company receive upon issuance of the bonds payable?(Round to the nearest dollar.)
2. Prepare an amortization table for the bond using the effective-interest method,through the first two interest payments (Round to the nearest dollar.)
3. Journalize the issuance of the bonds on January 1, 2018, and the first and secondpayments of the semiannual interest amount and amortization of the bonds onJune 30, 2018, and December 31, 2018. Explanations are not required.
Bond prices depend on the market rate of interest, stated rate of interest,and time.
Requirements
1. Compute the price of the following 8% bonds of Country Telecom.
a. \(100,000 issued at 75.25
b. \)100,000 issued at 103.50
c. \(100,000 issued at 94.50
d. \)100,000 issued at 103.25
2. Which bond will Country Telecom have to pay the most to retire at maturity?
Explain your answer.
Accounting for a long-term note payable
On January 1, 2018, Lakeman-Fay signed a \(1,500,000, 15-year, 7% note. The loan
required Lakeman-Fay to make annual payments on December 31 of \)100,000
principal plus interest.
Requirements
1. Journalize the issuance of the note on January 1, 2018.
2. Journalize the first note payment on December 31, 2018.
Retiring bonds payable before maturity
On January 1, 2018, Powell Company issued $350,000 of 10%, five-year bonds
payable
at 102. Powell Company has extra cash and wishes to retire the bonds payable
on
January 1, 2019, immediately after making the second semiannual interest
payment. To
retire the bonds, Powell Company pays the market price of 98.
Requirements
1. What is Powell Company’s carrying amount of the bonds payable on the
retirement
date?
2. How much cash must Powell Company pay to retire the bonds payable?
3. Compute Powell Company’s gain or loss on the retirement of the bonds
payable.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App