Chapter 14: 5E (page 720)
Find the polynomials such that
Short Answer
Answer:The required polynomials are:
Chapter 14: 5E (page 720)
Find the polynomials such that
Answer:The required polynomials are:
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Get started for freeOn January 1, Martinez Inc. issued \(3,000,000, 11% bonds for \)3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report bonds payable of:
(a) \(3,185,130. (c) \)3,173,550.
(b) \(3,184,500. (d) \)3,165,000.
Part I: The appropriate method of amortizing a premium or discount on issuance of bonds is the effective-interest method.
Instructions
Part II: Gains or losses from the early extinguishment of debt that is refunded can theoretically be accounted for in three ways:
Instructions
Distinguish between the following interest rates for bonds payable:
(a)Yield rate
(b) Nominal Rate
(c) Stated rate
(d) Market rate
(e) Effective rate
(Amortization Schedule—Straight-Line) Devon Harris Company sells 10% bonds having a maturity value of \(2,000,000 for \)1,855,816. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.
Instructions
Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to the nearest cent.)
(Issuance and Redemption of Bonds) Venezuela Co. is building a new hockey arena at a cost of \(2,500,000. It received a downpayment of \)500,000 from local businesses to support the project, and now needs to borrow \(2,000,000 to complete the project. It therefore decides to issue \)2,000,000 of 10.5%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 10%.
Instructions
(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2016.
(b) Prepare a bond amortization schedule up to and including January 1, 2020, using the effective-interest method.
(c) Assume that on July 1, 2019, Venezuela Co. redeems half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry to record this redemption.
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