Determining bond discount amortization

Assignment Help Accounting Basics

Reference no: EM13148255

On June 1, 2009, Everly Bottle Company sold $400,000 in long-term bonds for $351,040. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method.

Instructions

a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. Make sure all columns and rows are properly labeled. (Round to the nearest dollar.)

b) The sales price of $351,040 was determined from present value tables. Specifically explain how one would determine the price using present value tables.

c) Assuming that interest and discount amortization are recorded each May 31, prepare the adjusting entry to be made on December 31, 2011. (Round to the nearest dollar.)

Reference no: EM13148255

Questions Cloud

Weighted-average process costing to account : Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process.

Evaluate the engineering project when the marr is given : Evaluate the engineering project when the MARR is 15% per year. Is the project acceptable? Project A Investment cost $10,000. Expected life 5 years. Market Value -$1,000. Annual receipts $8000. Annual expenses $4000.

Does cast doubt on the airlines claim : 145 out of 165 people who lost luggage on that airline were reunited with the missing items by the next day. Does this cast doubt on the airlines claim?

What is blue or white clone selection : What is blue/white clone selection? What is used to determine transformation and what gene is used for testing for the presence of the insert?

Determining bond discount amortization : On June 1, 2009, Everly Bottle Company sold $400,000 in long-term bonds for $351,040. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%.

Target market and pricing strategy : Take a position on the fairness of the industry’s approach to pricing pharmaceutical products including offering an alternative strategy that may be more palatable to consumers. Provide a rationale with your position.

Why are complement binding sites found on red blood cells : Why are complement binding sites found on Red blood cells and what is the result of their binding?

Establish interval estimate around sample mean : Find the standard error of mean. Also establish an interval estimate around the sample mean using one standard deviation of the mean.

How your proposal ultimately maximizes profits : From the first e-Activity, propose a short-term and long-term pricing strategy for the product or service you researched including how the strategies would be implemented. Assess how your proposal ultimately maximizes profits.

User Account

All Pages