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hoa [83]
3 years ago
6

On April 1, 2021, Western Communications, Inc., issued 12% bonds, dated March 1, 2021, with face amount of $33 million. The bond

s sold for $32.3 million and mature on February 28, 2024. Interest is paid semiannually on August 31 and February 28. Stillworth Corporation acquired $33,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31, and both firms use the straight-line method.
1. Prepare the journal entries to record (a) issuance of the bonds by Western and (b) Stillworth’s investment on April 1, 2018.
2. Prepare the journal entries by both firms to record all subsequent events related to the bonds through maturity.
Business
1 answer:
masya89 [10]3 years ago
6 0

Answer:

western

Cash                                  32,300,000 debit

discount on bonds payable 700,000 debit

                bonds payable                   33,000,000 credit

interest expense    2,096,666.67‬     debit

      discount on bonds payable    116,666.67 credit

     cash                                          1,980,000 credit

(repeat for the 6 interest payment)

at maturity:

bonds payable 33,000,000 debit

         cash                   33,000,000 credit  

stillworth

Investment-Debt securities 32,300 debit

Discount on Debt securities    700 debit

                     cash                             33,000 credit

interest expense    2,096.67‬     debit

      discount on bonds payable    116.67 credit

     cash                                          1,980 credit

(repeat for the 6 interest payment)

at maturity:

cash      33,000 debit

       Investment-Debt securities   33,000 credit

Explanation:

western:

we subtract the face value from the proceeds to determiante how much is the discount

stillworth

As they were acquired as long erm investment we will record using an amortization method as they will be held until maturity. If not, we will simply use face value

<u><em>amortization of the bonds:</em></u>

The total payment are 6

so we divide the 700,000 among 6 to know the amortization per payment:

700,000/6 = 116,666.67

cash outlay:

33,000,000 x 0.12/2 = 1,980,000

interest expense will be the sum of both concepts:

1,980,000 + 116,666.67 = 2,096,666.67‬

for the 700 it will be:

700/6 = 116.67

then 33,000 x 0.06 = 1,980

1,980 + 116.67 = 2,096.67 interest expense.

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saul85 [17]

Answer:

21%

Explanation:

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IRR = 21%

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4 0
3 years ago
With an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets are:A.
kramer

Answer:

<em>.C. cash cow businesses with an excellent financial fit</em>

Explanation:

With an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets are:A. struggling companies with good turnaround potential, undervalued companies that can be acquired at a bargain price, and companies that have bright growth prospects but are short on investment capital.B. companies offering the biggest potential to reduce labor costs.C. cash cow businesses with an excellent financial fit.D. companies that are market leaders in their respective industries.E. companies that are employing the same basic type of competitive strategy as the parent corporation’s existing businesses.

Big businesses are usually the one that acquire  distressed companies /. They are called the cash cow because they are basically  business, investment, or product that provides a steady income or profit. they possess a large volume of the market share with little investment contribution to it.

5 0
3 years ago
Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has esti
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Answer:

By using the EOQ model, ray should order 22.8 units or 23 units each time

Explanation:

Solution

Recall that:

Ray annual estimated demand for this model is = 1,050 units

The cost of one unit carry is =$105

He estimated each order costs  to place = $26

Now,

The EOQ  model= (2*annual demand*ordering cost/holding cost per unit per year)^.5

Thus,

EOQ = (2*1050*26/105)^.5

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6 0
3 years ago
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bond
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Answer:

Explanation:

The journal entry is shown below:

On September 30

Bonds payable A/c Dr $1,000,000

Loss on bond retirement A/c Dr $20,000

          To Discount on Bond A/c  $10,000

          To Cash A/c $1,010,000

(Being the callable bond is recorded)

The computation is shown below:

For cash

= Par value of bond + Premium

= $1,000,000 + $10,000

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Answer:

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Explanation:

5 0
3 years ago
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