Log in
HomeClass Notes1,200,000US530,000

ACC 102 Lecture Notes - Lecture 10: Amortizing Loan, Operating Lease, Current Liability

6 views18 pages
arikline23
30 Mar 2023
School
DePaul University
Department
Accountancy
Course
ACC 102
Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Objective #1 management issues related to issuing long term debt. Are obligations of the business that are due to be paid after one year or beyond the normal operating cycle, whichever is longer. How a company finances its operations is the most important factor in the company"s long term viability. The amount and type of debt a company incurs depends on: the nature of the business its competitive environment the state of the financial markets the predictability of its earnings. Growing businesses frequently need long term financing to invest in r&d activities and long term assets. Key sources of long term funds issuance of capital stock issuance of long term debt such as bonds, notes, mortgages, and leases. Management issues related to issuing long term debt. A key management decision regarding long term funding for the company is: Dividends are paid only if the company earns sufficient income.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACC 102 Lecture Notes - Lecture 11: Treasury Stock, Dividend Policy, Regional Policy Of The European Union
arikline23
ACC 102 Lecture Notes - Lecture 13: United States Treasury Security, Cash Flow, Financial Statement
blackbuffalo990
ACC 102 Lecture Notes - Lecture 11: Interest Expense, Net Income, Effective Interest Rate
blackbuffalo990

Related Questions

January 1, 2017: Mega Corporation issued 20 year, 9% bonds with a face value of 2,875,000. The bonds were solid yield 8%. Interest is payable semi-annually on January 1 and July 1.

1. What is the issue price of the bonds (please show all work) ?

2. Using EXCEL, prepare an amortization table for the entire bond term. (Table should be properly labeled and neatly presented. Amounts should have commas and be rounded to the nearest dollar)

3. Record the bond issuance on 1/1/17.

4. Assume the company prepares financial statements semi annually on June 30 and December 31. Prepare the apropriate adjusting entries for June 30, 2017 and December 31, 2017 for interest and for amortization of the discount or premium. Use effective method amortization

5. What accounts related to this bond would be shown on the 12/31/17 balance sheet. Show in the proper sections

Liabilities

Current Liabilities:

Long-term Liabilities:

ABCCorporation issued 14%, 5-year bonds with a par value of $5,000,000on January 1, 2015. Interest is to be paid semiannually on eachJune 30 and December 31. The bonds were issued at $5,368,035 cashwhen the market rate for this bond was 12%.


(a) Prepare the general journal entry to record the issuance of thebonds on January 1, 2015.

1/1/15

(b) Show how the bonds would bereported on ABC's balance sheet at January 1, 2015.

Long-Term liabilities:

(c) Assume that ABC uses the effectiveinterest method for amortizing any discount or premium on bonds.Prepare the general journal entry to record the first semiannualinterest payment on June 30, 2015. SHOW YOUR CALCULATIONS!

6/30/15


(d) Assume instead that ABC uses the straight-line method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the first semiannual interest payment onJune 30, 2015. SHOW YOUR CALCULATIONS!

6/30/15


(e) Assume that ABC uses the effective interest method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the second semiannual interest payment onDecember 31, 2015. SHOW YOUR CALCULATIONS!

12/31/15

Problem 10-9A Wempe Co. sold $3,051,000, 9%, 10-year bonds onJanuary 1, 2014. The bonds were dated January 1, 2014, and payinterest on January 1. The company uses straight-line amortizationon bond premiums and discounts. Financial statements are preparedannually.

Prepare the journal entries to record the issuance of the bondsassuming they sold at: (1) 104 and (2) 96. (Credit account titlesare automatically indented when amount is entered. Do not indentmanually.)

No. Date Account Titles and Explanation Debit Credit 1. 1/1/142. 1/1/14

Prepare amortization tables for issuance of the bonds sold at104 for the first three interest payments.

Annual Interest Periods/ Interest to Be Paid Interest/ Expenseto Be Recorded/ Premium Amortization/ Unamortized Premium/ BondCarrying Value

Prepare amortization tables for issuance of the bonds sold at 96for the first three interest payments.

Prepare the journal entries to record interest expense for 2014under both of the bond issuances assuming they sold at: (1) 104 and(2) 96.

No. Date Account Titles and Explanation Debit Credit 1. 12/31/142. 12/31/14 Show List of Accounts Show the long-term liabilitiesbalance sheet presentation for issuance of the bonds sold at 104 atDecember 31, 2014. WEMPE Co. Balance Sheet (Partial) December 31,2014 $ : $ Show the long-term liabilities balance sheetpresentation for issuance of the bonds sold at 96 at December 31,2014. WEMPE Co. Balance Sheet (Partial) December 31, 2014 $ :