At December 31, 2021, Newman Engineering's liabilities include the following: 1. $18 million of 6% bonds were issued for $18 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2022. However, the option to call is not expected to be exercised, given prevailing market conditions. 2. $22 million of 5% notes are due on May 31, 2022. A debt covenant requires Newman to maintain current assets at least equal to 183 % of its current liabilities. On December 31, 2021, Newman is in violation of this covenant. Newman obtained a waiver from National City Bank until June 2022, having convinced the bank that the company's normal 2 to 1 ratio of current assets to curre liabilities will be reestablished during the first half of 2022. 3. $15 million of 8% bonds were issued for $15 million on August 1, 1989. The bonds mature on July 31, 2022. Sufficient cash is expected to be available to retire the bonds at maturity.

At December 31, 2021, Newman Engineering's liabilities include the following: 1. $18 million of 6% bonds were issued for $18 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2022. However, the option to call is not expected to be exercised, given prevailing market conditions. 2. $22 million of 5% notes are due on May 31, 2022. A debt covenant requires Newman to maintain current assets at least equal to 183 % of its current liabilities. On December 31, 2021, Newman is in violation of this covenant. Newman obtained a waiver from National City Bank until June 2022, having convinced the bank that the company's normal 2 to 1 ratio of current assets to curre liabilities will be reestablished during the first half of 2022. 3. $15 million of 8% bonds were issued for $15 million on August 1, 1989. The bonds mature on July 31, 2022. Sufficient cash is expected to be available to retire the bonds at maturity.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 7P: Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued...

See similar textbooks

Similar questions

Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
Required information [The following information applies to the questions displayed below.] On January 1, 2019, Drennen Inc. issued $3.1 million face amount of 7-year, 10% stated rate bonds when market interest rates were 8%. The bonds pay semiannual interest each June 30 and December 31 and mature on December 31, 2025. Table 6-4, Table 6-5 (Use appropriate factor from the table provided.) b-1. Assume instead that the proceeds were $3,052.000. Use the horizontal model to record the payment of semiannual interest and the related discount amortization on June 30, 2019, assuming that the discount of $48,000 is amortized on a straight-line basis. Indicate the financial statement effect. (Enter decreases with a minus sign to indicate a negative financial statement effect.) Balance Sheet Income Statement Assets Liabilities + Stockholders' Equity - Net Income Revenues Expenses
Which of the following debt should be classified as a current liability on December 31, 2020 in the Company's balance sheet? A. $24 million of 6% bonds were issued for $24 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2021. However, the option to call is not expected to be exercised, given prevailing market conditions. B. Blues Company borrowed $100,000 through a 7% note payable dated December 31, 2016. Interest is due annually on December 31, and the principal is due on December 31 2021. The note will be paid on December 31, 2021, with amounts Blues Company accumulated in a long-term investment fund classified as a long-term asset. a. B only. b. Neither A nor B c. A only.
Required information [The following information applies to the questions displayed below.] Temptation Vacations issues $49 million in bonds on January 1, 2024, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) Date 1/1/2024 6/30/2024 12/31/2024 (2) Cash Paid for Interest Issue price $1,470,000 1,470,000 (3) Interest Expense $1,378,755 1,376,473 (4) Decrease in Carrying Value $91,245 93,527 (5) Carrying Value $55,150, 180 55,058,935 54,965,408 2. What is the original issue price of the bonds? (Enter your answer in whole dollars, not millions (i.e., $5.5 million should be entered as 5,500,000).) W
Temptation Vacations issues $58 million in bonds on January 1, 2021, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) (2) (3) (4) (5) Cash Paid for Interest Interest Expense Decrease in Carrying Value Carrying Value Date 1/1/2021 $65,279,805 6/30/2021 $1,740,000 1,631,995 $108,005 $65,279,805 12/31/2021 1,740,000 1,629,295 $110,705 65,171,800 3. What is the face amount of the bonds? (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000)) Face amount
Temptation Vacations issues $58 million in bonds on January 1, 2021, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) (2) (3) (4) (5) Cash Paid for Interest Interest Expense Decrease in Carrying Value Carrying Value Date 1/1/2021 $65,279,805 6/30/2021 $1,740,000 1,631,995 $108,005 $65,279,805 12/31/2021 1,740,000 1,629,295 $110,705 65,171,800 6. What is the total cash paid for interest assuming the bonds mature in 20 years? (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000)) Total cash interest
Temptation Vacations issues $58 million in bonds on January 1, 2021, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) (2) (3) (4) (5) Cash Paid for Interest Interest Expense Decrease in Carrying Value Carrying Value Date 1/1/2021 $65,279,805 6/30/2021 $1,740,000 1,631,995 $108,005 $65,279,805 12/31/2021 1,740,000 1,629,295 $110,705 65,171,800 5. What is the market annual interest rate? (Round your answer to the nearest whole percent.) Market annual interest rate
E14-5 Straight-Line Premium Amortization On January 1, 2019, Hackman Corporation issued $1 million face value 12% bonds dated January 1, 2019, for $1,023,000. The bonds pay interest semiannually on June 30 and December 31 and are due December 31, 2023. Hackman uses the straight-line amortization method. Required: Record the issuance of the bonds and the first two interest payments.
Temptation Vacations issues $58 million in bonds on January 1, 2021, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) (2) (3) (4) (5) Cash Paid for Interest Interest Expense Decrease in Carrying Value Carrying Value Date 1/1/2021 $65,279,805 6/30/2021 $1,740,000 1,631,995 $108,005 $65,279,805 12/31/2021 1,740,000 1,629,295 $110,705 65,171,800 2. What is the original issue price of the bonds? (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000)) Issue price
18 Required information [The following information applies to the questions displayed below.] Temptation Vacations issues $49 million in bonds on January 1, 2024, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) Date 1/1/2024 6/30/2024 12/31/2024 (2) Cash Paid for Interest Face amount $1,470,000 1,470,000 (3) Interest Expense $1,378,755 1,376,473 (4) Decrease in Carrying Value $91,245 93,527 (5) Carrying Value $55,150, 180 55,058,935 54,965,408 3. What is the face amount of the bonds? (Enter your answer in whole dollars, not millions (i.e., $5.5 million should be entered as 5,500,000).)
ony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. THA's accountant has projected the following amortization schedule from issuance until maturity: Date cash paid Interest Expense Increase in carrying value carrying value 01/01/2021 $218,690 06/30/2021 $11,500 $13,121 $1,621 220,311 12/31/2021 11,500 13,219 1,719 222,030 06/30/2022 11,500 13,322 1,822 223,852 12/31/2022 11,500 13,431 1,931 225,783 06/30/2023 11,500 13,547 2,047 227,830 12/31/2023 11,500 13,670 2,170 230,000 THA issued the bonds for: Multiple Choice $230,000. $218,690. $299,000. Cannot be determined from the given information.
Exercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and Retirement (LO10-5, LO10-6) Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the following journal entries. a. April 1, 2021, to record the issuance of the bonds. b. September 30, 2021, to pay interest and to amortize the bond premium. c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities. (ignore possible income tax effects.) (If no entry is required for a transaction/event,…