Ex 14 118 bond issue price and premium amortization

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Ex. 14-118Bond issue price and premium amortization.On January 1, 2011, Piper Co. issued ten-year bonds with a face value of $1,000,000 and astated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds weresold to yield 12%. Table values are:Present value of 1 for 10 periods at 10%..................................386Present value of 1 for 10 periods at 12%..................................322Present value of 1 for 20 periods at 5%....................................377Present value of 1 for 20 periods at 6%....................................312Present value of annuity for 10 periods at 10%........................6.145Present value of annuity for 10 periods at 12%........................5.650Present value of annuity for 20 periods at 5%..........................12.462Present value of annuity for 20 periods at 6%..........................11.470Instructions(a)Calculate the issue price of the bonds.(b) Without prejudice to your solution in part (a), assume that the issue price was $884,000.Prepare the amortization table for 2011, assuming that amortization is recorded on interestpayment dates.Solution 14-118To download more slides, ebooks, solution manual, and test bank, visit
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Chapter 3 / Exercise 3-3
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Long-Term Liabilities14 - 31Ex. 14-119Amortization of discount or premium.Grider Industries, Inc. issued $6,000,000 of 8% debentures on May 1, 2010 and received cashtotaling $5,323,577. The bonds pay interest semiannually on May 1 and November 1. The maturitydate on these bonds is November 1, 2018. The firm uses the effective-interest method of amortizingdiscounts and premiums. The bonds were sold to yield an effective-interest rate of 10%.InstructionsCalculate the total dollar amount of discount or premium amortization during the first year (5/1/10through 4/30/11) these bonds were outstanding.(Show computations and round to the nearestdollar.)Ex. 14-120Entries for Bonds Payable.
Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co.(a)On April 1, 2009, Quirk issued $500,000, 9% bonds for $537,868 including accrued interest.
(b)On July 1, 2011 Quirk retired $150,000 of the bonds at 102 plus accrued interest. Quirk usesstraight-line amortization.Solution 14-120

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Fundamentals of Financial Management, Concise Edition
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Chapter 3 / Exercise 3-3
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Brigham/Houston
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