On June 30, 2014, Lipton, Inc. sold $100,000 of 8% bonds for $102,530. The bonds are dated June 30, 2014, pay
interest annually on June 30, and will mature on June 30, 2019.

On the basis of the above information, answer the following questions. (Round your answer to the nearest dollar or percent if necessary.)

1.      What is the stated (face value) interest rate for this bond issue?

2.      Were the bonds issued at a premium or a discount?

3.      What was the market price of the bonds (how much cash would Lipton receive at issuance)?

4.     How much cash will be paid to bondholders on June 30, 2015?

5.     What will be the value of the bonds when they are redeemed at maturity on June 30, 2019? (How much cash will the company have to pay bondholders on that date?)

6.  Prepare the journal entry on June 30, 2014 for the issuance of the bonds.

7.  If the bonds had been issued as convertible with the option for bond holders to convert each $1,000 bond into 10 shares of $5 par value common stock, record the entry on June 30, 2018 if after interest was paid all bond holders decided to convert their bonds. At the time of conversion $2,500 unamortized premium remained on the bonds.

Answer rating: 100% (QA)

answers Requirement 1 It is given in the question that bonds are issued with 8 interest Stated inter... View the full answer