Reference no: EM132405504
Assignment - Non-Current Liabilities Questions
Note - All calculations are to be rounded to nearest whole currency unit, unless otherwise stated.
Q1. Whiteside Corporation issues ¥500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.
Q2. The Colson Company issued €300,000 of 10% bonds on January 1, 2015. The bonds are due January 1, 2020, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson's journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
Q3. Assume the bonds in Q2 were issued at 108.11 to yield 8%. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31.
Q4. Assume the bonds in Q2 were issued at 92.6393 to yield 12%. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31.
Q5. Devers Corporation issued £400,000 of 6% bonds on May 1, 2015. The bonds were dated January 1, 2015, and mature January 1, 2017, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Devers' journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
Q6. On January 1, 2015, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%.
Q7. Assume the bonds in Q6 were issued for $644,636 with the effective-interest rate of 6%. Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
Q8. Tan Corporation issued HK$600,000,000 of 7% bonds on November 1, 2015, for HK$644,636,000. The bonds were dated November 1, 2015, and mature in 10 years, with interest payable each May 1 and November 1. The effective-interest rate is 6%. Prepare Tan's December 31, 2015, adjusting entry.
Q9. Coldwell, Inc. issued a €100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2015, and received €100,000 cash. The note requires annual interest payments each December 31. Prepare Coldwell's journal entries to record (a) the issuance of the note and (b) the December 31 interest payment.
Q10. Samson Corporation issued a 4-year, £75,000, zero-interest-bearing note to Brown Company on January 1, 2015, and received cash of £47,664. The implicit interest rate is 12%. Prepare Samson's journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest.
Q11. McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January 1, 2015, and received a computer that normally sells for $31,495. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 12%. Prepare McCormick's journal entries for (a) the January 1 issuance and (b) the December 31 interest.
Q12. Shlee Corporation issued a 4-year, €60,000, zero-interest-bearing note to Garcia Company on January 1, 2015, and received cash of €60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for similar notes is 12%. Prepare Shlee Corporation's January 1 journal entry.
Q13. On January 1, 2015, Henderson Corporation retired $500,000 of bonds at 99. At the time of retirement, the unamortized premium was $15,000. Prepare Henderson's journal entry to record the reacquisition of the bonds.
Q14. Refer to the note issued by Coldwell, Inc. in BE14-9. During 2015, Coldwell experiences financial difficulties. On January 1, 2016, Coldwell negotiates a settlement of the note by issuing to Flint Hills Bank 20,000 €1 par Coldwell ordinary shares. The ordinary shares have a market price of €4.75 per share on the date of the settlement. Prepare Coldwell's entries to settle this note.
Q15. Refer to the note issued by Coldwell, Inc. in BE14-9. During 2015, Coldwell experiences financial difficulties. On January 1, 2016, Coldwell negotiates a modification of the terms of the note. Under the modification, Flint Hills Bank agrees to reduce the face value of the note to €90,000 and to extend the maturity date to January 1, 2020. Annual interest payments on December 31 will be made at a rate of 8%. Coldwell's market interest rate at the time of the modification is 12%. Prepare Coldwell's entries for (a) the modification on January 1, 2016, and (b) the first interest payment date on December 31, 2016.
Q16. Shonen Knife Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 11% and has a carrying value of HK$16,000. At year-end, Shonen Knife's borrowing rate has declined; the fair value of the note payable is now HK$17,500. (a) Determine the unrealized gain or loss on the note. (b) Prepare the entry to record any unrealized gain or loss, assuming that the change in value was due to general market conditions.
Q17. At December 31, 2015, Hyasaki Corporation has the following account balances:
Bonds payable, due January 1, 2023 - $1,912,000
Interest payable - 80,000
Show how the above accounts should be presented on the December 31, 2015, statement of financial position, including the proper classifications.