Will the bond proceeds always be greater than the face

Reference no: EM13598411

Maui Blends, Inc. produces and sells organically grown coffee. On July 1, 2012, Maui Blends, Inc. issued $2,800,000 of 7-year, 13% bonds at a market (effective) interest rate of 11%, receiving cash of $2,695,045. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
For all journal entries with a compound transaction, if an amount box does not require an entry, leave it blank.
Hide
Hint(s)
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on December 31, 2012, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)

b. The interest payment on June 30, 2013, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)

3. Determine the total interest expense for 2012.

4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?

5. Compute the price of $2,695,045 received for the bonds by using the tables of present value in Appendix A. (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount $
Present value of the semi-annual interest payments $
Price received for the bonds $

Reference no: EM13598411

Questions Cloud

Assume the dollar amounts given above are for the : assume the dollar amounts given above are for the equivalent of 40000 units produced during the year. compute the

Berkley company a manufacturer of many different products : berkley company a manufacturer of many different products changed its inventory method from fifo to lifo. the lifo

Ltpgtin eight years kent duncan will retire he is exploring : ltpgtin eight years kent duncan will retire. he is exploring the possibility of opening a self-service car wash. the

Three-quarters of all purchases are paid for in the month : pierce merchandising company expects to purchase 90000 of materials in march and 105000 of materials in april.

Will the bond proceeds always be greater than the face : maui blends inc. produces and sells organically grown coffee. on july 1 2012 maui blends inc. issued 2800000 of 7-year

Discuss the differences between accrual-basis financial : discuss the differences between accrual-basis financial statements and cash-basis financial statements. determine which

Stone co began operations in year 1 and reported 225000 in : stone co. began operations in year 1 and reported 225000 in income before income taxes for the year. stones year 1 tax

Fairfax company uses weighted-average process costing to : fairfax company uses weighted-average process costing to account for its production costs. direct labor is added evenly

Assume at the end of the year management believed the : goodwill of 200000 was recorded as a result of an acquisition of a company in a previous year.what type of asset is the

User Account

All Pages