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CHAPTER 8BONDS PAYABLEFair value opionProblem 8-1 (AICPA Adapted) Glen Company had the following long-term debt: Sinking fund bonds, maturing in installments 2,200. 000 Industrial revenue bonds, maturing in installments 1,800, Subordinated bonds, maturing on a single date 3,000, What is the total am...

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CHAPTER 8 BONDS PAYABLE Fair value option Problem 8-1 (AICPA Adapted) Glen Company had the following long-term debt: Sinking fund bonds, maturing in installments

2,200.000

Industrial revenue bonds, maturing in installments

1,800,000

Subordinated bonds, maturing on a single date

3,000,000

What is the total amount of serial bonds? a. 3,000,000 b. 4.000,000 C. 4,800,000 d. 7,000,000

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Problem 8-2 (AICPA Adapted) Tola 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

1,800,0000

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

111

Problem 8-3 (AICPA Adapted) Blue Company reported the following long-term debt on December 31, 2019: 9% registered debentures, callable in 2020, due in 2021 3,500,000 11% collateral trust bonds, convertible into ordinary shares beginning in 2020, due in 2021 3,000,000 10% subordinated debentures, P500,000 maturing annually beginning in 2020 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

112

Problem 8-4 (AICPA Adapted) On March 1, 2019, Cain Company issued at 103 plus accrued interest 4,000 bonds of 9%, P1,000 face amount. The bonds are dated January 1,2019 and mature on January 1,2029. Interest is payable semiannually on January l and July 1. The entity paid bond issue cost of P200,000. What is the net cash received from the bond issuance? a. 4,320,000 b. 4,180,000 c. 4,120,000 d. 3,980,000 113

Problem 8-5 (AICPA Adapted) On April 1, 2019, Greg Company issued at 99 plus accrued interest, 2,000 of 8% P1,000 face amount bonds. The bonds are dated January 1, 2019, mature on January 1, 2029, and pay interest on January 1 and July 1. The entity paid bond issue cost of P70,000 From the bond issuance, what is the net cash received? a. 2,020,000 b. 1,980,000 C. 1,950,000 d. 1,910,000

113

Problem 8-6 (AICPA Adapted) During the current year, Eddy 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

100,000

Commissions paid to underwriter

1,500,000

What amount should be recorded as bond issue costs to be amortized over the term of the bonds? a. 2,550,000 b. 2,750,000 C. 1,500,000 d. 1,050,000

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Problem 8-7(AICPA Adapted) On January 31, 2019, Beau Company issued P3,000,000 maturity value, 12% bonds for P3,000,000 cash. The bonds are dated December 31,2018 and mature on December 31,2028. Interest is payable semiannually on June 30 and December 31. What amount of accrued interest payable should be reported on September 30, 2019? a. 270,000 b. 240,000 C. 180,000 d. 90,000

114

Problem 8-8 (AICPA Adapted) On November 1, 2019, Mason Company issued P8,000,000 of 10-year, 8% term bonds dated October 1, 2018. The bonds were sold to yield 10% with total proceeds of P7,000,000 plus accrued interest. Interest is paid every April 1 and October 1. What amount should be reported as accrued interest payable on December 31, 2019? a. 175,000 b. 160,000 C. 116,667 d. 106,667 115

Problem 8-9 (AICPA Adapted) On June 30, 2019, Huff Company issued at 99, five thousand bonds of 8%, P1,000 face amount. The bonds were issued through an underwriter to whom the entity paid bond issue cost of P425,000. On June 30, 2019, what amount should be reported as bond liability? a. 4,525,000 b. 4,950,000 c. 5,000,000 d. 4,575,0000 115

Problem8-10 (AICPA Adapted) On July 1, 2019, Carr Company issued at 104, five thousand bonds of P1,000 face amount. The bonds were issued through an underwriter to whom the entity paid bond issue cost of P125,000, On July 1, 2019, what amount should be reported as bond liability? a. 4,875,000 b. 5,075,000 C. 5,200,000 d. 5,325,000 116

Problem8-11 (IAA) Aye Company is authorized to issue P5,000,000 of 6%, 10-year bonds dated July 1, 2019 with interest payments on June 30 and December 31. When the bonds are issued on November 1,2019, the entity received cash of P5,150,000 including accrued interest. What amount was recorded as discount or premium on bonds payable? a. 150,000 bond premium b. 50,000 bond premium c. 150,000 bond discount d. No bond premium and discount

116

Problem8-12 (AICPA Adapted) On January 1, 2019, Ezekiel 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 has elected the fair value option for measuring the financial liability. On December 31, 2019, the fair value of the bonds is determined to be P1,064,600 due to market and interest factors. 1. What is the carrying amount of the bonds payable on January 1, 2019? a. 1,000,000 b. 1,077,200 C. 500,000 d. 538,600 2. What amount should be reported as interest expense for 2019? a. 120,000 b. 100,000 C. 107,720 d. 129,264 3. What amount should be reported as gain or loss from change in fair value of the bonds for 2019? 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, 2019? a. 1,064,600 b. 1,077,200 C. 1,000,000 d. 1,064,920 117...