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Practice Problem (Bonds Payable)

Marbel Company issued $5,000,000 face value 12% bonds on April 1, 2016 at 98% of par. Interest is payable semiannually on April 1 and October 1. The bonds mature on April 1, 2021. On July 1, 2017, $2,000,000 face value of bonds were purchased at 99% of par plus accrued interest and retired.

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1K views4 pages

Practice Problem (Bonds Payable)

Marbel Company issued $5,000,000 face value 12% bonds on April 1, 2016 at 98% of par. Interest is payable semiannually on April 1 and October 1. The bonds mature on April 1, 2021. On July 1, 2017, $2,000,000 face value of bonds were purchased at 99% of par plus accrued interest and retired.

Uploaded by

Kristine Mae Presentacion
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Problem no.

Marbel Company was authorized to issue 12% bonds with face amount of P5,000,000 on April 1, 2016.
Interest on the bonds is payable semiannually on April 1 and October 1. Bonds mature on April 1, 2021.
The entire issue was sold on April 1, 2016, at 98 less bond issue cost of P50,000. On July 1, 2017, bonds
of P2,000,000 face amount were purchased and retired at 99 plus accrued interest.

Required:

1. Prepare journal entries including any adjustments relating to the issuance of the bonds for 2016
and 2017. Use the memorandum approach and the straight-line method of amortization.
2. Present the bonds payable in the statement of financial position on December 31, 2017.

My answer is in the excel file.

Problem no. 4

Glen Company had the following long-term debt:

Sinking fund bonds, maturing in installments 1,100,000


Industrial revenue bonds, maturing in installments 900,000
Subordinated bonds, maturing on a single date 1,500,000

What is the total amount of serial bonds?

a. 1,500,000
b. 2,000,000
c. 2,400,000
d. 3,500,000

`98f

Blue Company reported the following financial liabilities on December 31, 2016:

9% debenture, callable in 2017, due in 2018 3,500,000


11% collateral trust bonds, convertible into share
Capital beginning in 2017, due in 2018 3,000,000
10% debentures, P300 maturing annually 1,500,000

What is the total amount of term bonds?

a. 3,000,000
b. 3,500,000
c. 5,000,000
d. 6,500,000
Problem no. 6

Zola Company had the following long-term debt:

Bonds maturing in installments, secured by machinery 1,000,000


Bonds maturing on a single date, secured by realty 1,800,000
Collateral trust bonds 2,000,000

What is the total amount of debenture bonds?

a. 2,000,000
b. 1,000,000
c. 1,800,000
d. 0

Problem no. 7

Hancock Company reported the following noncurrent liabilities on December 31, 2016:

Unsecured

9% registered bond, 250,000


Maturing annually beginning in 2017 2,750,000
11% convertible bonds, callable
Beginning in 2017, due 2018 1,250,000

Secured

12% guaranty security bonds, due 2018 2,500,000


10% commodity backed bonds, P500,000
Maturing annually beginning in 2017 2,000,000

1. What total amount of serial bonds should be reported?


a. 4,750,000
b. 3,750,000
c. 4,500,000
d. 2,000,000
2. What total amount of debenture bonds should be reported?
a. 4,000,000
b. 1,250,000
c. 6,500,000
d. 6,000,000

Problem no. 9
On April 1, 2016, Greg Company issued, at 99 plus accrued interest, 4,000 8% bonds with face amount of
P1,000 per bond. The bonds are dated January 1, 2016, mature on January 1, 2026, and pay interest on
January 1 and July 1. The entity paid bond issue cost of P140,000.
How much cash was received from the bond issuance?

a. 4,040,000
b. 3,960,000
c. 3,900,000
d. 3,820,000

Problem no. 10

On March 1, 2016, Cain Company issued at 103 plus accrued interest 4,000 9% bonds with face amount
of P1,000 per bond. The bonds are dated January 1, 2016 and mature on January 1, 2026. Interest is
payable semiannually on January 1 and July 1. The entity paid bond issue cost of P200,000.
How much cash was received from the bond issuance?

a. 4,320,000
b. 4,180,000
c. 4,120,000
d. 3,980,000

Problem no. 12

On June 30, 2016, Huff Company issued at 99, four thousand 8% bonds with P1,000 face amount per
bond. The bonds were issued through an underwriter to whom the entity paid bond issue cost of
P340,000.
On June 30, 2016, what is the carrying amount of the bonds payable?

a. 3,820,000
b. 3,960,000
c. 4,000,000
d. 3,620,000

Problem no. 13

During the current year, Cain Company incurred the following costs in connection with the issuance of
bonds:

Promotion cost 200,000


Printing and engraving 150,000
Legal fees 800,000
Fees paid to independent accountants
For registration information 100,000
Commissions paid to underwriter 900,000

What total amount should be recorded as bond issue cost to be amortized over the term of the bonds?
a. 1,950,000
b. 2,150,000
c. 1,800,000
d. 2,000,000

Problem no. 16

On January 1, 2016, Trisha Company received P1,077,200 for 12% bonds with face amount of
P1,000,000. The bonds were sold to yield 10%. Interest is payable semiannually every January 1 and July
1. The entity elected the fair value option for measuring financial liabilities. On December 31, 2016, the
fair value of the bonds is P1,064,600. The change in fair value of the bonds is attributable to market
factors.

1. What is the carrying amount of the bonds payable on January 1, 2016?


a. 1,000,000
b. 1,077,200
c. 500,000
d. 538,600
2. What is the interest expense for 2016?
a. 120,000
b. 100,000
c. 107,720
d. 129,264
3. What is the gain or loss from change in fair value of the bonds payable for 2016?
a. 64,600 gain
b. 64,600 loss
c. 12,600 gain
d. 12,600 loss
4. What is the carrying amount of the bonds payable on December 31, 2016?
a. 1,064,600
b. 1,077,200
c. 1,000,000
d. 1,064,920
5. Prepare the journal entries for 2016
My answer is in the excel file.

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