Corporate Financial Accounting
15th Edition
ISBN: 9781337398169
Author: Carl Warren, Jeff Jones
Publisher: Cengage Learning
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Question
Chapter 11, Problem 11.7EX
To determine
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.
To Identify: The flaws in the reporting practices related to the two bond issues.
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At the beginning of the current year, two bond issues (Simmons Industries 7%, 20-year bonds and Hunter Corporation 8%, 10-year bonds) were outstanding. During the year, the Simmons
Industries bonds were redeemed and a significant loss on the redemption of bonds was reported on the income statement. At the end of the year, the Hunter bonds were reported as a noncurrent
liability. The maturity date on the Hunter bonds was early in the following year.
The Hunter Corporation bonds outstanding at the end of the current year should be reported as a
Industries bonds should be reported as an
in the income statement.
on the balance sheet and the loss on redemption of the Simmons
At the beginning of the current year, two bond issues (Simmons Industries 7%, 20-year bonds and Hunter Corporation 8%, 10-year bonds) were outstanding. During the year, the Simmons Industries bonds were redeemed and a significant loss on the redemption of bonds was reported as cost of merchandise sold on the income statement. At the end of the year, the Hunter Corporation bonds were reported as a noncurrent liability. The maturity date on the Hunter Corporation bonds was early in the following year.Identify the flaws in the reporting practices related to the two bond issues.
[The following information applies to the questions displayed below.]
On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on December 31. The bonds
mature at the end of four years. Olive uses the effective-interest amortization method. The partially completed
amortization schedule below pertains to the bonds:
Date
Cash
Interest
Amortization
Balance
1/1/20x1
$ 52,833
12/31/20x1
$ 5,200
$ 5,019
$ 181
52,652
12/31/20x2
?
?
?
12/31/20x3
?
?
217
52,454
?
12/31/20x4
?
4,963
?
52,000
Required:
1. Complete the amortization schedule.
Note: Enter all your values in positive. Round your final answers to nearest whole dollar amount.
Date
1/1/20x1
12/31/20x1
Cash
Interest
Amortization
Balance
$
52,833
$
5,200 $
5,019 $
181
$
52,652
12/31/20x2
$
52,454
12/31/20x3
$
217
12/31/20x4
4,963
$
52,000
Chapter 11 Solutions
Corporate Financial Accounting
Ch. 11 - Describe the two distinct obligations incurred by...Ch. 11 - Explain the meaning of each of the following terms...Ch. 11 - If you asked your broker to purchase for you a 11%...Ch. 11 - A corporation issues 26,000,000 of 9% bonds to...Ch. 11 - If bonds issued by a corporation are sold at a...Ch. 11 - Prob. 6DQCh. 11 - Bonds Payable has a balance of 5,000,000 and...Ch. 11 - Prob. 8DQCh. 11 - Prob. 9DQCh. 11 - Issuing bonds at face amount On January 1, the...
Ch. 11 - Issuing bonds at a discount On the first day of...Ch. 11 - Prob. 11.3BECh. 11 - Prob. 11.4BECh. 11 - Prob. 11.5BECh. 11 - Prob. 11.6BECh. 11 - Times interest earned Averill Products Inc....Ch. 11 - Prob. 11.1EXCh. 11 - Entries for issuing bonds Thomson Co. produces and...Ch. 11 - Prob. 11.3EXCh. 11 - Prob. 11.4EXCh. 11 - Prob. 11.5EXCh. 11 - Entries for issuing and calling bonds; gain Mia...Ch. 11 - Prob. 11.7EXCh. 11 - Present value of amounts due Assume that you are...Ch. 11 - Prob. 11.9EXCh. 11 - Present value of an annuity On January 1 you win...Ch. 11 - Prob. 11.11EXCh. 11 - Prob. 11.12EXCh. 11 - Present value of bonds payable; premium Moss Co....Ch. 11 - Amortize discount by interest method On the first...Ch. 11 - Prob. 11.15EXCh. 11 - Prob. 11.16EXCh. 11 - Prob. 11.17EXCh. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 11.2APRCh. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 11.5APRCh. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Analyze and compare Amazon.com and Wal-Mart...Ch. 11 - Prob. 11.2MADCh. 11 - Prob. 11.3MADCh. 11 - Analyze and compare Hilton and Marriott Hilton...Ch. 11 - Ethics in Action CLG Capital Inc. is a large...Ch. 11 - Prob. 11.3TIFCh. 11 - Present values Alex Kelton recently won the...
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