Unit 6 Assignment 1
lakeisha.smithwick
unit_6_p10-2_-_cp10-2.xlsxP10-2
| P10-2 Reporting Bonds Issued at Par LO 10-2 | |||||||||
| On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate | |||||||||
| of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent. | |||||||||
| (If necessary, use the appropriate factor(s) from the tables provided.) ( | FV of $1 | PV of $1 | FVA of $1 | PVA of $1 | ) | ||||
| Required: | |||||||||
| 1 | What was the issue price on January 1, 2014? | ||||||||
| Issue price | |||||||||
| 2 | What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? | ||||||||
| June 30, 2014 | December 31, 2014 | ||||||||
| Interest expense | |||||||||
| 3 | What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? | ||||||||
| June 30, 2014 | December 31, 2014 | ||||||||
| Cash paid | |||||||||
| 4 | What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015? | ||||||||
| December 31, 2014 | December 31, 2015 | ||||||||
| Bonds payable | |||||||||
P10-2 Check Figures
| P10-2 Reporting Bonds Issued at Par LO 10-2 | |||||||||
| On January 1, 2014, Nowell Company issued $500,000 in bonds that mature in five years. The bonds have a stated interest rate | |||||||||
| of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 8 percent. | |||||||||
| (If necessary, use the appropriate factor(s) from the tables provided.) ( | FV of $1 | PV of $1 | FVA of $1 | PVA of $1 | ) | ||||
| Required: | |||||||||
| 1 | What was the issue price on January 1, 2014? | ||||||||
| Issue price | |||||||||
| 2 | What amount of interest expense should be recorded on (a) June 30, 2014? and (b) December 31, 2014? | ||||||||
| June 30, 2014 | December 31, 2014 | ||||||||
| Interest expense | $20,000 | ||||||||
| 3 | What amount of cash interest should be paid on (a) June 30, 2014? and (b) December 31, 2014? | ||||||||
| June 30, 2014 | December 31, 2014 | ||||||||
| Cash paid | |||||||||
| 4 | What is the book value of the bonds on (a) December 31, 2014? and (b) December 31, 2015? | ||||||||
| December 31, 2014 | December 31, 2015 | ||||||||
| Bonds payable | |||||||||
CP10-2
| CP10-2 | Finding Financial Information | LO10-1, 10-2 | |
| Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. | |||
| Required: | |||
| 1. Unlike most companies, Urban Outfitters does not report the amount of interest paid in cash during the most | |||
| recent reporting year. Explain why you think the company has omitted this information. | |||
| 2. Explain why the company does not report bonds payable on its balance sheet. | |||
| 3. Describe the company's established arrangements, if any, that permit it to borrow money if needed. | |||
CP10-2 Check Figures
| CP10-2 | Finding Financial Information | LO10-1, 10-2 | |
| Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. | |||
| Required: | |||
| 1. Unlike most companies, Urban Outfitters does not report the amount of interest paid in cash during the most | |||
| recent reporting year. Explain why you think the company has omitted this information. | |||
| 2. Explain why the company does not report bonds payable on its balance sheet. | |||
| 3. Describe the company's established arrangements, if any, that permit it to borrow money if needed. | |||
| The notes disclose that the company has established an unsecured line of credit. | |||
