Central Lakes College Compute the Accounting Values for Honest Company Questions

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hfreanzr2015

Business Finance

Central Lakes College

Description

Instructions:

  1. I will not accept any typed solution and your answer must be in hand writing.
  2. You need to submit your answer on the Assignment section of D2L before the deadline.
  3. Your answer will be graded based on your efforts and not on being correct.

On June 1, 2019, Honest Company sold $3,000,000 in long-term bonds for $2,631,300. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method.

Required:

(a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. Make sure all columns and rows are properly labeled. (Round to the nearest dollar.)

(b) The sales price of $2,631,300 was determined from present value tables. Specifically explain how one would determine the price using present value tables.

(c) Assuming that interest and discount amortization are recorded each May 31, prepare the adjusting entry to be made on December 31, 2021. (Round to the nearest dollar.)

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Explanation & Answer

Attached. Please let me know if you have any questions or need revisions.

Amortization
Student Name
Institution Affiliate
Date

A.
Face value of the bond = $3,000,000
Book value of the bond = $2,631,300
Interest rate = 8%
Yield Rate = 105
Interest expense – interes...


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