On January 1 , 2 0 2 0 , Larkspur Company issued bonds of face value $ 2 8 0 , 0 0 0 ( 2 8 0 bonds of $ 1 , 0 0 0 face value ) , with 8 coupon Similar bonds trade at a yield of 1 2 in the market Interest is paid on Dec 3 1 st of each year, and the bonds mature on Dec 3 1 st 2 0 2 3 Round all answers to the nearest dollar A At what amount did Larkspur report the bonds on the balance sheet on Jan 1 st 2 0 2 0 B Prepare a 4 year schedule of interest expense and bond discount ( or premium ) amortization using the Effective Interest Method C Write the financial statement effects, if any, on a Jan 1 st , 2 0 2 0 b Dec 3 1 st 2 0 2 2 D Assume the company decides to repurchase the bonds on Dec 3 1 st , 2 0 2 2 in the open market Yields on similar bonds have now dropped to 6 Write the financial statement effects of the bond repurchase First estimate the price at which the 2 8 0 bonds were repurchased i It is calculate the bond price on Dec 3 1 st , 2 0 2 2 Remember now only one year was remaining to maturity on this date

Question: On January 1 , 2 0 2 0 , Larkspur Company issued bonds of face value $ 2 8 0 , 0 0 0 (

On January

1, 2020,

Larkspur Company issued bonds of face value $

280, 000 (280

bonds of $

1, 000

face value

),

with

8 %

coupon. Similar bonds trade at a yield of

12 %

in the market. Interest is paid on Dec

31

st of each year, and the bonds mature on Dec

31

2023 .

Round all answers to the nearest dollar.

.

At what amount did Larkspur report the bonds on the balance sheet on Jan

1

2020 ?

.

Prepare a

4 -

year schedule of interest expense and bond discount

(

or premium

)

amortization using the Effective Interest Method.

.

Write the financial statement effects, if any, on:

.

Jan

1

, 2020

.

Dec

31

2022

.

Assume the company decides to repurchase the bonds on Dec

31

, 2022

in the open market. Yields on similar bonds have now dropped to

6 % .

Write the financial statement effects of the bond repurchase First estimate the price at which the

280

bonds were repurchased i

.

It is

.

calculate the bond price on Dec

31

, 2022 .

Remember now only one year was remaining to maturity on this date.

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A On January 1 2020 Larkspur Company would report the bonds on the balance sheet at the issue price The issue price of the bonds can be calculated by discounting the future cash flows coupon payments ... View full answer

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