1 answer

Exercise 14-9 On June 30, 2017, Vaughn Company issued $4,500,000 face value of 13%, 20-year bonds...

Question:

Exercise 14-9

On June 30, 2017, Vaughn Company issued $4,500,000 face value of 13%, 20-year bonds at $4,838,533, a yield of 12%. Vaughn uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

Prepare the journal entries to record the following transactions. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(1) The issuance of the bonds on June 30, 2017.
(2) The payment of interest and the amortization of the premium on December 31, 2017.
(3) The payment of interest and the amortization of the premium on June 30, 2018.
(4) The payment of interest and the amortization of the premium on December 31, 2018.

No.

Date

Account Titles and Explanation

Debit

Credit

(1)

June 30, 2017

(2)

December 31, 2017

(3)

June 30, 2018

(4)

December 31, 2018

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

LINK TO TEXT

Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2018, balance sheet. (Round answers to 0 decimal places, e.g. 38,548.)
Vaughn Company
Balance Sheet

December 31, 2018For the Year Ended December 31, 2018For the Quarter Ended December 31, 2018

Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity

$

Interest ExpensePremium on Bonds PayableBook Value of Bonds PayableDiscount on Notes PayableInterest PayableCashLoss on Redemption of BondsNotes PayableNotes ReceivableBad Debt Expense

$

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

LINK TO TEXT

Provide the answers to the following questions.

(1) What amount of interest expense is reported for 2018? (Round answer to 0 decimal places, e.g. 38,548.)
Interest expense reported for 2018 $


(2) Will the bond interest expense reported in 2018 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used?
The bond interest expense reported in 2018 will be

greater thanless thansame as

the amount that would be reported if the straight-line method of amortization were used.

(3) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.)
Total cost of borrowing over the life of the bond $


(4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest expense if the straight-line method of amortization were used?
The total bond interest expense for the life of the bond will be

greater thanless thanthe same as

the total interest expense if the straight-line method of amortization were used.

Answers

4,500,000
(A) (b) c=a-b d=CV -c
6.50% 6%
Date Cash interest premium Carrying
expense amortized value
6/30/2017 4,838,533
12/31/2017 292500 290312 2188 4,836,345
6/30/2018 292500 290181 2319 4,834,026
12/31/2018 292500 290042 2458 4,831,567
a)
1) Journal Entries
Date Account titles & Explanations Debit Credit
6/30/2017 Cash 4,838,533
premium on bonds payable 338,533
Bonds payable 4,500,000
2) 12/31/2017 interest expense 290312
premium on bonds payable 2188
cash 292500
3) 6/30/2018 interest expense 290181
premium on bonds payable 2319
cash 292500
4) 12/31/2018 interest expense 290042
premium on bonds payable 2458
cash 292500
b) Balance Sheet (Partial )
As on December 31,2018
Long term liabilities
Bonds payable 4,500,000
Add:premium on bonds 331,567 4,831,567
c)
1) Amount of interest expense reported for 2018 580222
2) Greater
3) total cost of borrowing 11361467
total cash paid
bonds payable 4,500,000
interest paid (4,500,000*13%*20) 11700000 16200000
Cash received at time of issue -4,838,533
total cost of borrowing 11361467
4) Same
.

Similar Solved Questions

1 answer
Isaac used 1/4 of an ounce of nuts to make 1/12 pound of cake. How many ounces of nuts are needed to make a cake?
Isaac used 1/4 of an ounce of nuts to make 1/12 pound of cake. How many ounces of nuts are needed to make a cake?...
1 answer
Part A is thrown into a fire which is at 745 What will be its pressure in atmospheres at 745 °C? A can containing F...
Part A is thrown into a fire which is at 745 What will be its pressure in atmospheres at 745 °C? A can containing Freon gas (CCI,F,) at 1.96 atm and 12 " Express your answer to three significant figures. 30 ALOR O ? Submit Request Answer...
1 answer
Lnerable Population Identify appropriate health promotion and disease and injury prevention interventions (primary, secondary, and tertiary...
lnerable Population Identify appropriate health promotion and disease and injury prevention interventions (primary, secondary, and tertiary – refer to the reading in your textbook from the previous module) Poor and Homeless Pregnant Teens Mentally Ill ...
1 answer
Three capacitors (4.02, 5.84, and 11.8 μF) are connected in series across a 51.0 V battery....
Three capacitors (4.02, 5.84, and 11.8 μF) are connected in series across a 51.0 V battery. Calculate the voltage across the 4.02 μF capacitor....
1 answer
Problem 5. You own a private parking lot near Stony Brook University with a capacity of...
Problem 5. You own a private parking lot near Stony Brook University with a capacity of 600 cars. The demand at this lot is estimated to be q 1000-2p where q is the number of costumers with monthly parking for parking passes and p is the monthly parking fee per car (a) Derive your Marginal Revenue s...
1 answer
A man travels 370 km partly by train and partly by car. If he covers 250 km by train and rest by car, it takes him 4 hours. But if he travels 130 km by train and the rest by car, he takes 18 mins longer. Find the speed of train and that of car?
A man travels 370 km partly by train and partly by car. If he covers 250 km by train and rest by car, it takes him 4 hours. But if he travels 130 km by train and the rest by car, he takes 18 mins longer. Find the speed of train and that of car?...
1 answer
Expected data starts with parts per rim standard | deluxe Elton Company manufactures wheel rims. The...
expected data starts with parts per rim standard | deluxe Elton Company manufactures wheel rims. The controller expects the following The company expects to produce 500 units of each model during the year. ABC allocation rates for 2018: (Click the icon to view the allocation rates.) Read the require...
1 answer
A charge of 24.9 ?C is located at (4.39 m, 6.08 m), and a charge of...
A charge of 24.9 ?C is located at (4.39 m, 6.08 m), and a charge of -11.9 ?C is located at (-4.58 m, 6.83 m). What charge must be located at (2.24 m, -2.92 m) if the electric potential is to be zero at the origin?...
1 answer
An industrial engineer wishes to compare the mean number of units assembled per employee in a...
An industrial engineer wishes to compare the mean number of units assembled per employee in a week for two new assembly techniques. Two hundred employees from the factory are randomly selected and each is randomly assigned to one of the two techniques After teaching 100 employees' one technique ...
1 answer
Reflect on the analysis of the sin of suicide and, thus, euthanasia from the topic readings....
Reflect on the analysis of the sin of suicide and, thus, euthanasia from the topic readings. Do you agree? Why or why not? Refer to the lecture and topic readings in your response...
1 answer
An answer I gave elsewhere. Some cases to ponder over. A closed string splits into two...
An answer I gave elsewhere. Some cases to ponder over. A closed string splits into two closed strings, which then merge again into a single closed string. The overall string worldsheet has the topology of a torus. There is an SL(2,Z) group of large diffeomorphisms acting upon this worldsheet. The co...
1 answer
Linda took her wedding dress to be dry-cleaned at Fussy Dry Cleaners. After handing over the...
Linda took her wedding dress to be dry-cleaned at Fussy Dry Cleaners. After handing over the dress and paying, Linda received a docket. On the reverse side it said “we accept no responsibility for damage during the cleaning process.” Fussy Dry Cleaners did not take reasonable care of the...
1 answer
How do you evaluate the integral #int 1/(x(1+(lnx)^2)#?
How do you evaluate the integral #int 1/(x(1+(lnx)^2)#?...
1 answer
Problem 1: [7 points) Let X be the proportion of impurities in a chemical product. The...
Problem 1: [7 points) Let X be the proportion of impurities in a chemical product. The distribution of X has the following p.d.f. f(1) = 0(0+1)26-1(1 - 1) for 0<<<1. (a) Show that E(X) = 642. [2] (b) Let X1, ..., X, denote impurities in a random sample of size n of shipment of chemical. Fin...
1 answer
3. Graph the following vectors on the same coordinate system (two dimensions). d) -6个 b) -6个+2个...
3. Graph the following vectors on the same coordinate system (two dimensions). d) -6个 b) -6个+2个 c) 51- 2.51 . Graph the following vectors on the same coordinate system (three dimensions) =-51+4j_6k 4. Given the vectors: 저介·診, で= .2个-3...
1 answer
Self-test 4.9 A hard-working human brain, perhaps one that is grappling with physical chemistry, operates at...
Self-test 4.9 A hard-working human brain, perhaps one that is grappling with physical chemistry, operates at about 25 W (1 W = 1J s-'). What mass of glucose must be consumed to sustain that power output for an hour? Answer: 5.7 g sugars and persal of m released u are oxidize of organiz biologica...
1 answer
The temperature data acquisition system which uses a thermocouple for o. Analyze measuring temper...
the temperature data acquisition system which uses a thermocouple for o. Analyze measuring temperature shown below. Answer the following questions. Show your work. (25 points) 0.2HF Front End 10ko Themocoupio Amplifier 12 bit ADGC Front End Amplifier Gain Bandwidth Product GBW 500kHz Gain 100 Input ...