CA 14.1 - (Bond Theory: Balance Sheet Presentations,...

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(Bond Theory: Balance Sheet Presentations, Interest Rate, Premium) On January 1, 2011, Nichols Company issued for $1,085,800 its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay interest semiannually on January 1 and July 1. Bond issue costs were not material in amount.Below are three presentations of the long-term liability section of the balance sheet that might be used for these bonds at the issue date. (a) Discuss the conceptual merit(s) of each of the date-of-issue balance sheet presentations shown above for these bonds. Answer: 1. This is a common balance sheet presentation and has the advantage of being familiar to users of financial statements. The face or maturity value of $1,000,000 is shown in an obvious manner. The total of $1,085,800 is the objectively determined exchange price at which the bonds were issued. It represents the fair market value of the bond obligations
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given. Thus, this is in keeping with the generally accepted accounting practice of using
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CA 14.1 - (Bond Theory: Balance Sheet Presentations,...

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