Classroom Exercises on Bonds Payable 1. Issuance Issuance of Bonds on Interest Interest Payment Payment Date – Discount Discount
On December 31, 2011, ABS Company issues a two- year 8% P 2,000,000 face value value bonds at a price price tat will yield a 10% effective effective interest interest rate! rate! "nterest "nterest is payable semi-annually on #une 30 and December 31! $euired& Prepare all pertinent entries!
2. Issuance Issuance of Bonds on Interest Interest Payment Payment Date – Premium Premium
On December 31, 2011, CB Company issues a tree - year 12% P2,000,000 face value value bonds bonds at a price price tat will yield yield a 10% effecti effective ve interest interest rate! rate! 'e interest is payable annually every December 31! $euired& Prepare all pertinent entries!
!. Issuance Issuance of Bonds Bonds Bet"een Bet"een Interest Interest Payment Payment Dates – Discount Discount
On (ebr (ebruar uary y 1, 201 2011, #$A Company sells sells a two-ye two-year ar 8% P2,000,000 P2,000,000 face value bonds at a price tat will yield a 10% effective effective interest rate! 'e bonds are dated December 31, 2010! "nterest is payable semi-annually on #une 30 and December 31! Prepare& Prepare all pertinent entries!
%. Issuance Issuance of Bonds Bonds Bet"een Bet"een Interest Interest Payment Payment Dates – Premium Premium
On )arc 1, 2011, &P Company sells a tree-year 12% P2,000,000 face value bonds at a price tat will yield a 10% effective interest rate! 'e bonds are dated December 31, 2010! "nterest is payable annually every December 31! Prepare all pertinent entries!
'. Bond Bond &etir &etiremen ementt on $aturity $aturity Date Date
*ssume tat tat P2,000,000 P2,000,000 face value value bonds are are sold on #anuary #anuary 1, 2008 2008 wit 12% 12% interest payable payable every #uly 1 and December December 31! "t will mature on December December 31, 2011! Prepare entry to record te bond retirement to+eter wit te payment of last semi-annual interest! 1
(. Bond &etirement Prior to $aturity Date
*ssume tat P10,000,000 face value bonds are sold on *pril 1, 2011 and mature on *pril 1, 201 wit 12% interest payable semi-annually on *pril 1 and October 1! 'e bonds yield 10%! *ll te bonds are retired on *u+ust 1, 2013 at 8! Prepare all necessary .ournal entries! ). Partial Bond &etirement Prior to $aturity Date IBC Company is buildin+ a new +ymnasium at a cost of P/,000,000! "t received a down payment of P1,000,000 from local businesses to support te pro.ect and need to borrow P3,000,000 to complete te pro.ect! "t terefore decided to issue P3,000,000 of 10! % 10-year bonds! 'ese bonds were issued on #anuary 1, 2011 and pay interest annually every #anuary 1! 'e bonds yield 12%! On #uly 1, 2013, alf of te bonds were retired at P1,00,000 plus accrued interest!
Prepare all necessary .ournal entries! *. Con+ertible Bonds ,B- Corporation issued P2,000,000 of 8% bonds on October 1, 2011 due on October 1, 201 at 10! 'e interest is to be paid twice a year on *pril 1 and October 1! en te bonds were issued, te prevailin+ maret rate is 10% witout te conversion privile+e! 4O 5orporation closes its boos annually on December 31!
6ac P1,000 bond is convertible into 8 sares of P100 par value common stoc! On #anuary 1, 2013, 1,000 bonds are converted into ordinary sares! *t tis time, te sare as a maret value of P10 per sare and te bonds are uoted at 102! Prepare .ournal entries on October 1, 2011 and #anuary 1, 2013! . Bonds /it0 /arrants
On #anuary 1, 2011, B Corporation issued 3,000 10-year bonds of 12% P1,000 face value eac wit warrants to acuire ordinary sares at P0 per sare! 'e interest on te bonds is payable annually every December 31! 6ac bond contains one warrant wic can be used to acuire sares of P/0 par value ordinary sares! "t is estimated tat witout warrants te bonds would sell at P8! 'e bond price wit warrants is 10! *ll warrants are e7ercised on December 31, 2011! Prepare entries in connection wit bond issuance and e7ercise of warrants!
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1.Bond &efundin
'e records of ABC Corporation on #anuary 1, 2011 sow te followin+ accounts& Premium on bonds payable 4ond issue cost *ccrued interest 4onds payable due #anuary 201 interest at 12% payable semiannually on #anuary 1 and #uly 1
P
10,000 0,000 /0,000 ,000,000
On #anuary 1, 2011, te followin+ too place& 5as of P11,00,000 was made available from te sale of P12,000,000 of 10-year 10% bonds! 5as from te new issue was used for te retirement of te 12% bonds at a call price of 102! Prepare te pertinent entries
11. Amorti3ation of Bond Issue Costs 4sin Effecti+e Interest $et0od
On #anuary 1, 2011, C Company issued a 3-year bond wit face value of P1,000,000 and a % stated rate! 'e bonds mature on #anuary 1, 201/ and interest is payable annually on December 31! 'e bonds are issued wit an effective yield of 10%! 'e company also paid bond issue costs! 4ecause of te bond issue costs, te ad.usted effective rate is 11%! Required:
a! 5ompute for te bond issue cost! b! Prepare te amorti9ation table usin+ effective interest metod! c! Prepare all pertinent entries!
12. Issuance of Bonds– Discount5 6air 7alue -ption
On December 31, 2011, ABS Company issues a two- year 8% P 2,000,000 face value bonds at a price tat will yield a 10% effective interest rate! "nterest is payable semi-annually on #une 30 and December 31! *4: e7ercises te fair value option in measurin+ its bonds payable! 'e bonds are repurcased on 30 #une 2013! 'e followin+ are te maret rates for te *4: bonds& 31 December 2012 12% 30 #une 2013 8% $euired& Prepare all pertinent entries!
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Issuance of Bonds on Interest Payment Date – Premium5 -ption
6air 7alue
On December 31, 2011, CB Company issues a tree - year 12% P2,000,000 face value bonds at a price tat will yield a 10% effective interest rate! 'e interest is payable annually every December 31! 54; e7ercises te fair value option in measurin+ its bonds payable! 'e bonds are repurcased on 30 #une 201/ at 102, its fair value at tat date! 'e followin+ are te maret rates for te 54; bonds& 31 December 2012 8% 31 December 2013 12% $euired& Prepare all pertinent entries!
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