Chapter 14: 5E (page 720)
Find the polynomials such that
Short Answer
Answer:The required polynomials are:
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Chapter 14: 5E (page 720)
Find the polynomials such that
Answer:The required polynomials are:
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BE14-2 (L01) The Colson Company issued $300,000 of 10% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson鈥檚 journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
On March 1, 2017, Sealy Company sold its 5-year, $1,000 face value, 9% bonds dated March 1, 2017, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first interest payment date is September 1, 2017. Sealy uses the effective-interest method of amortization. The bonds can be called by Sealy at 101 at any time on or after March 1, 2018.
Instructions
a. (1) How would the selling price of the bond be determined?
(2) Specify how all items related to the bonds would be presented in a balance sheet prepared immediately after the bond issue was sold.
b. What items related to the bond issue would be included in Sealy鈥檚 2017 income statement, and how would each be determined?
c. Would the amount of bond discount amortization using the effective-interest method of amortization be lower in the second or third year of the life of the bond issue? Why?
d. Assuming that the bonds were called in and redeemed on March 1, 2018, how should Sealy report the redemption of the bonds on the 2018 income statement?
What is meant by 鈥渁ccounting symmetry鈥 between the entries recorded by the debtor and creditor in a troubled-debt restructuring involving a modification of terms? In what ways is the accounting for troubled-debt restructurings non-symmetrical?
Question: Describe how a company would classify debt that includes covenants. What conditions must exist in order to depart from the normal rule?
Assume the bonds in BE14-6 were issued for $644,636 and the effective-interest rate is 6%. Prepare the company鈥檚 journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
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