Questions -
1. On January 1, 2016, Legion Company sold $250,000 of 8% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $192,650, priced to yield 12%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2016, in the amount of (Round your answer to the nearest dollar amount)?
2. On January 1, 2016, Solo Inc. issued 1,600 of its 7%, $1,000 bonds at 99. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2026. Solo paid $67,000 in bond issue costs. Solo uses straight-line amortization. The amount of interest expense for the year is?
3. On January 1, 2016, an investor paid $302,000 for bonds with a face amount of $370,000. The stated rate of interest is 10% while the current market rate of interest is 12%. Using the effective interest method, how much interest income is recognized by the investor in 2016 (assume annual interest payments and amortization)?
4. On January 31, 2016, B Corp. issued $750,000 face value, 10% bonds for $750,000 cash. The bonds are dated December 31, 2015, and mature on December 31, 2025. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should B report in its September 30, 2016, balance sheet? (Do not round intermediate calculations.)
5. Auerbach Inc. issued 9% bonds on October 1, 2016. The bonds have a maturity date of September 30, 2026 and a face value of $425 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2017. The effective interest rate established by the market was 11%.
How much cash interest does Auerbach pay on March 31, 2017? (Answer should be in million rounded to two decimal places.)
6. During the year, Hamlet Inc. paid $30,000 to have bond certificates printed and engraved, paid $160,000 in legal fees, paid $16,000 to a CPA for registration information, and paid $180,000 to an underwriter as a commission. What is the amount of bond issue costs?
7. On February 1, 2015, Pat Weaver Inc. (PWI) issued 8%, $1,800,000 bonds for $2,100,000. PWI retired all of these bonds on January 1, 2016, at 105. Unamortized bond premium on that date was $189,000. How much gain or loss should be recognized on this bond retirement?
8. TMC issued $65 million of its 12% bonds on April 1, 2016, at 98 plus accrued interest. The bonds are dated January 1, 2016, and mature on December 31, 2035. Interest is payable semiannually on June 30 and December 31. What amount did TMC receive from the bond issuance? (Do not round intermediate calculations.)
9. On September 1, 2016, Sam's Shoe Co. issued $400,000 of 7% bonds. The bonds pay interest semiannually on January 1 and July 1 of each year. The bonds were sold at the face amount. How much cash did Sam's receive upon sale of the bonds? (Do not round intermediate calculations and round final answer to nearest whole dollar.)
10. Auerbach Inc. issued 6% bonds on October 1, 2016. The bonds have a maturity date of September 30, 2026 and a face value of $425 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2017. The effective interest rate established by the market was 8%.
Assuming that Auerbach issued the bonds for $367,242,458, what interest expense would it recognize in its 2016 income statement? (Do not round intermediate calculations and round final answer to nearest whole dollar.)
11. Auerbach Inc. issued 6% bonds on October 1, 2016. The bonds have a maturity date of September 30, 2026 and a face value of $320 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2017. The effective interest rate established by the market was 8%.
Assuming that Auerbach issued the bonds for $280,121,000, what would the company report for its net bond liability balance after its first interest payment on March 31, 2017?
12. On June 30, 2016, Hardy Corporation issued $11.5 million of its 12% bonds for $10.5 million. The bonds were priced to yield 14%. The bonds are dated June 30, 2016, and mature on June 30, 2026. Interest is payable semiannually on December 31 and July 1. If the effective interest method is used, by how much should the bond discount be reduced for the six months ended December 31, 2016?
13. On January 1, 2016, Zebra Corporation issued 1,200 of its 11%, $1,000 bonds at 98.3. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2026. Zebra paid $59,000 in bond issue costs. Zebra uses the straight-line amortization method. What is the bond book value reported in the December 31, 2016, balance sheet?
14. Cramer Company sold five-year, 8% bonds on October 1, 2016. The face amount of the bonds was $190,000, while the issue price was $202,000. Interest is payable on April 1 of each year. The fiscal year of Cramer Company ends on December 31. How much interest expense will Cramer Company report in its December 31, 2016, income statement (assume straight-line amortization)? (Do not round intermediate calculations.)
15. On April 1, 2016, Austere Corporation issued $400,000 of 8% bonds at 108. Each $1,000 bond was sold with 50 detachable stock warrants, each permitting the investor to purchase one share of common stock for $19. On that date, the market value of the common stock was $16 per share and the market value of each warrant was $3. Austere should record what amount of the proceeds from the bond issue as an increase in liabilities?
16. Nickel Inc. bought $300,000 of 3-year, 8% bonds as an investment on December 31, 2015 for $324,000. Nickel uses straight-line amortization. On May 1, 2016, $60,000 of the bonds were redeemed at 111. As a result of the retirement, Nickel will report (Do not round intermediate calculations and round final answer to nearest whole dollar.).
17. On March 1, 2016, E Corp. issued $1,400,000 of 14% nonconvertible bonds at 105, due on February 28, 2026. Each $1,000 bond was issued with 40 detachable stock warrants, each of which entitled the holder to purchase, for $70, one share of Evan's $35 par common stock. On March 1, 2016, the market price of each warrant was $3. By what amount should the bond issue proceeds increase shareholders' equity?
18. On June 30, 2016, K Co. had outstanding 10%, $11,500,000 face value bonds maturing on June 30, 2021. Interest is payable semiannually every June 30 and December 31. On June 30, 2016, after amortization was recorded for the period, the unamortized bond premium and bond issue costs were $51,000 and $115,000, respectively. On that date, K acquired all its outstanding bonds on the open market at 98 and retired them. At June 30, 2016, what amount should K Co. recognize as gain on redemption of bonds before income taxes?
19. On January 1, 2011, F Corp. issued 3,300 of its 8%, $1,000 bonds for $3,396,000. These bonds were to mature on January 1, 2021, but were callable at 101 any time after December 31, 2014. Interest was payable semiannually on July 1 and January 1. On July 1, 2016, F called all of the bonds and retired them. The bond premium was amortized on a straight-line basis. Before income taxes, F Corp.'s gain or loss in 2016 on this early extinguishment of debt was?