Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds: Date of bonds: January 1, 201
8 Maturity amount and date: $300,000 due in 10 years (December 31, 2027) Interest: 10 percent per year payable each December 31 Date issued: January 1, 2018 Required: For each of the three independent cases that follow, provide the amounts to be reported on the January 1, 2018, financial statements immediately after the bonds are issued. TIP: See Exhibit 10.5 for an illustration distinguishing Bonds Payable from their carrying value. (Deductions should be indicated by a minus sign.)
2 answers:
Question in order:
See the first image attached
Answer and Explanation:
Reported amount as of 1, January 2018 after bonds were issued is as below
CASE A CASE B CASE C
Issued at 100 Issued at 95 issued at 103
a. Bonds Payable $130,000 $130,000 $130,000
b. Discount Premium $0 $6,500 $3,900
Discount Premium
130,000×(100 130,000×(100-
-95)⁰/₀ 103)⁰/₀
c. Carrying value $130,000 $123,500 $133,900
payable bonds would be the maturity amount or face value of bonds. The bonds payable would remain same, that is, $130,000 in each case.
In case B, the discount is calculated because the bonds are issued at a price which is less than the face value
in case C, The premium is calculated when the bond are issued at a price that is more than the face value
Carrying value will be calculated by deducting the discount from the bond s payable or by adding the premium in the bonds payable
You might be interested in