Terra Company issued a $300,000, 7.50%, 10-year bond on June 1, 2015. Additional information on the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Terra Company issued a $300,000, 7.50%, 10-year bond on June 1, 2015. Additional information on the bond follows: Bond Date: January 1, 2015 Maturity Date: December 31, 2024 Yield (Market) Rate: 8% Interest Payment Date: Interest is paid annually on December 31 of each year Terra's year end: September 30 Required: Round calculations to the nearest dollar a) Calculate the present value of the bond assuming that it had been issued on January 1, 2015. Show calculations/keystrokes. (1 mark) b) Prepare a bond amortization table from January 1, 2015 until December 31, 2018. Show each annual interest payment. (3 marks) c) Calculate the total amount of cash received by Terra on June 1, 2015, reflecting the fact the bond was issued on June 1, 2015. Make the journal entry to record the bond issue on June 1, 2015. (4 marks) d) Prepare the adjusting entry required at Terra's year end, Sept 30, 2017. (2 marks) e) Prepare the journal entry on Terra's books to make the December 31, 2017 interest payment to its investors. (2 marks) f) On July 1, 2018, Terra Company decides to retire 20% of the bonds at 98 plus accrued interest. (1) Make the entry to record interest up to July 1 including interest payable (interest will be paid when the bond is retired in part (ii) below) (3 marks) (ii) Make the entry to retire the bonds. (5 marks) g) Make the entry on Terra's books on December 31, 2018 to pay out interest to the remaining bondholders. (3 marks) Terra Company issued a $300,000, 7.50%, 10-year bond on June 1, 2015. Additional information on the bond follows: Bond Date: January 1, 2015 Maturity Date: December 31, 2024 Yield (Market) Rate: 8% Interest Payment Date: Interest is paid annually on December 31 of each year Terra's year end: September 30 Required: Round calculations to the nearest dollar a) Calculate the present value of the bond assuming that it had been issued on January 1, 2015. Show calculations/keystrokes. (1 mark) b) Prepare a bond amortization table from January 1, 2015 until December 31, 2018. Show each annual interest payment. (3 marks) c) Calculate the total amount of cash received by Terra on June 1, 2015, reflecting the fact the bond was issued on June 1, 2015. Make the journal entry to record the bond issue on June 1, 2015. (4 marks) d) Prepare the adjusting entry required at Terra's year end, Sept 30, 2017. (2 marks) e) Prepare the journal entry on Terra's books to make the December 31, 2017 interest payment to its investors. (2 marks) f) On July 1, 2018, Terra Company decides to retire 20% of the bonds at 98 plus accrued interest. (1) Make the entry to record interest up to July 1 including interest payable (interest will be paid when the bond is retired in part (ii) below) (3 marks) (ii) Make the entry to retire the bonds. (5 marks) g) Make the entry on Terra's books on December 31, 2018 to pay out interest to the remaining bondholders. (3 marks)
Expert Answer:
Answer rating: 100% (QA)
Solution a Face Value 300000 Coupon Payment 22500 Rate 8 Period 10 Present Value of Bonds 28993488 b ... View the full answer
Related Book For
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young
Posted Date:
Students also viewed these accounting questions
-
The Tinsley Company exchanged land that it had been holding for future plant expansion for a more suitable parcel located farther from residential areas. Tinsley carried the land at its original cost...
-
Make the journal entry to record each of the following transactions: (a) The company purchased inventory for $5,000. The purchase was made on account. (b) The company paid cash of $3,500 on its...
-
Alyson, another investor, has also purchased an IIP for the original price of $918.29787051119. Two years pass, and Alyson has just received the annual payment of $42. She is considering selling the...
-
Suppose you want to reduce the level of trash disposed by your household. Develop an emission standard, a technology standard, and an ambient standard that would accomplish the reduction.
-
Why is subcultural analysis especially significant in a country such as the United States?
-
Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve...
-
Identify the most appropriate approach and then design. Provide a rationale as to why this approach and design would be most appropriate. Develop a hypothetical research scenario that would...
-
Mick Karra is the manager of MCZ Drilling Products, which produces a variety of specialty valves for oil field equipment. Recent activity in the oil fields has caused demand to increase drastically...
-
Knowing the specific heat of ice and water is 2.05KJ/kg o C and 4.18kJ/kgC. What is the heat needed to change 2kg of ice at -20 C into 100 C water?
-
Suppose that the payoff from a derivative will occur in 6 years and will equal the 3-year U.S. dollar swap rate for a semiannual-pay swap observed at that time applied to a certain principal. Assume...
-
Write a paper about a case study FREE WILL
-
You own an investment portfolio as follows: Company Unit owned Price per share Expected return (per annum) X 1,000 RM5 8 percent Y 1,500 RM2 12 percent Calculate your expected return on the...
-
The following piece of news appeared on the Financial Times news feed on Friday 26th March 2021, 10.34am. "Metals manufacturer Worthington Industries (WI) announced the start of contacts with the...
-
You have new clients who are married, Victor and Jessica Parker. They came to your office today and provided you with the following information for the year: Victor annual gross income = $75,000...
-
INSTRUCTIONS: (a) Using the data above, compute pension expense for the year 2019 by preparing a pension worksheet. (b) Prepare the journal entry for pension expenses for 2019. (c) Compute the net...
-
The owner of a small bookstore in NYC is considering a sale. The bookstore beta is 0.87. R2 across bookstores in 0.45. What is the total beta for the bookstore owner?
-
Jim Murray and Phyllis Lowe received a total of $61,500 from a deceased relative's estate. They decided to put $12,300 in a trust for their nephew and divide the remainder. Phyllis received 2/3 of...
-
A non-charmed baryon has strangeness S = 2 and electric charge Q = 0. What are the possible values of its isospin I and of its third component I z ? What is it usually called if I = 1/2?
-
Dillman Corporation has nexus in States A and B. Dillmans activities for the year are summarized below. Determine the apportionment factors for A and B assuming that A uses a three-factor...
-
In January 2015, Pelican, Inc., established an allowance for uncollectible accounts (bad debt reserve) of $70,000 on its books and increased the allow-zzz ance by $120,000 during the year. As a...
-
In the past, Congress has considered proposals that would allow a taxpayer to claim a tax credit for tuition paid to send a dependent to a private school. Is there any justification for such a...
-
Approximately 50,000 new titles, including new editions, are published each year in the United States, giving rise to a $25 billion industry in 2001. In terms of percentage of sales, this industry...
-
When you think of political persuasion, you may think of the effortsthat political campaigns undertake to persuade you that their candidate is betterthan the other candidate. In truth, campaigns are...
-
Exeter, Inc., is a catalog firm that sells products in a number of different catalogs that it owns. The catalogs number in the dozens but fall into nine basic categories: 1. Clothing 2. Housewares 3....
Study smarter with the SolutionInn App