Consider the Following Statement: "Issuing Bonds at a Discount Is

Question 114

Essay

Consider the following statement: "Issuing bonds at a discount is bad for the issuing company." Discuss the statement and comment on its validity.

Related questions

Q 115

On January 1,2019,Simmons Company issued $100,000 of its ten-year,6% bonds payable at $108,000 to yield a market rate of 5%.The bonds were dated January 1,2019,and interest is paid semiannually on each June 30 and each December 31.The effective interest method is used for amortization and no adjusting journal entries were made during the year. A.Prepare the journal entry for the sale of the bonds. B.Prepare the journal entry to record the first interest payment and include the appropriate date before the entry. C.Prepare the journal entry to record the second interest payment and include the appropriate date before the entry.

Q 116

Harriman Company authorized a $1,000,000,10-year,6% bond issue dated January 1,2019,when the market rate was 8%.Annual interest will be paid each December 31.On January 1,2019,the bonds were issued for $866,000.Harriman Company has a December 31 year-end. A.Prepare the journal entry to record the sale of the bonds. B.Prepare the required journal entry on December 31,2019 to record amortization using the effective interest method.No adjusting journal entries were made during the year. C.Was the bond issued at par,at a discount,or at a premium? D.Will interest expense over the life of the bond be greater than,less than,or equal to the total cash payment for interest over the life of the bond?

Q 117

On January 1,2019,Jaspo,Inc.issued a $1,000,5%,five-year bond for $1,092 when the market rate was 3%.The bond was dated on January 1,2019,and interest is payable each December 31.Jaspo,Inc.has a December 31 year-end and uses the effective interest method of amortization.Jaspo does not use a discount or a premium account for bonds in its accounting records. A.Prepare the journal entry required on January 1,2019. B.Prepare the journal entry required on December 31,2019.Round the entry items to whole dollar amounts. C.Was the bond issued at par,at a premium,or at a discount? D.What is the carrying value (book value)of the bond at December 31,2019? Round your answer to a whole dollar amount. E.Where in the financial statements does the carrying value of the bond appear? (Be specific). F.On what date does the bond issue mature?