Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. diaz company issued $80,000 face value of bonds on

Diaz Company issued $80,000 face value of bonds on January 1, 2018. The bonds had a...

Free

60.1K

Verified Solution

Question

Accounting

Diaz Company issued $80,000 face value of bonds on January 1,2018. The bonds had a 6 percent stated rate of interest and aten-year term. Interest is paid in cash annually, beginningDecember 31, 2018. The bonds were issued at 98. The straight-linemethod is used for amortization. Required a. Use a financialstatements model like the one shown below to demonstrate how (1)the January 1, 2018, bond issue and (2) the December 31, 2018,recognition of interest expense, including the amortization of thediscount and the cash payment, affect the company’s financialstatements. Use + for increase, ? for decrease, and NA for notaffected. b. Determine the carrying value (face value less discountor plus premium) of the bond liability as of December 31, 2018. c.Determine the amount of interest expense reported on the 2018income statement. d. Determine the carrying value (face value lessdiscount or plus premium) of the bond liability as of December 31,2019. e. Determine the amount of interest expense reported on the2019 income statement.

Answer & Explanation Solved by verified expert
3.8 Ratings (395 Votes)

Ques 1
Balance sheet Income statement
Event Assets Liabilties equity revenue expenses net income Cash flow
1 + + NA NA NA NA + FA
2 - + - NA + - - OA
Ques 2
Discount on bonds 1600
80000*0.02
amortization of bond discount year 1 160
1600/10
carying value december 31
Bonds payable 80000
Less:discount on bonds payable 1440
(1600-160)
Carrying value 78560
ques 3
interest expense
stated interest 4800
80000*0.06
Amortization of bond discount 160
interest expense 4960
Ques 4
carying value december 31
Bonds payable 80000
Less:discount on bonds payable 1280
(1600-160*2)
Carrying value 78720
Ques 5
interest expense
stated interest 4800
80000*0.06
Amortization of bond discount 160
interest expense 4960

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies...

Psychology
1.2K views

6. How does Mead explain the importance of social interaction in the development of the self?...

Advance Math
1.2K views

Consider the following initial value problem: ?? ? 2?? = ?? ? 2? + 3 ??...

Physics
1.2K views

Plot the corresponding reference circle for each of the following simple harmonic motions Indicate the...

Statistics
1.2K views

the game of roulette a wheel consists of 38 slots numbered 0 00 1 2...

Calculus
1.2K views

Find the second derivative of the function f x x 4x 1 5 OO 44x...

Algebra
1.2K views

line with the given slope that passes through the point with the gi slope 5...

Algebra
1.2K views

Solve 47 3x 10 110 Select the correct answer O x 6 x 6 O...

Accounting
1.2K views

Capital budgeting is primarily concerned with

Accounting
1.2K views

help please keauiredi

Accounting
1.2K views

Chapter 8 talks not only about the Cash but also about internal controls. Internal controls...

Finance
1.2K views

What corporate taxable yield is equivalent to a 14% municipal bond rate, if your marginal...