(Comprehensive Problem; Issuance, Classification, Reporting) Presented below are four independent situations.
1. On March 1, 2008, Heide Co. issued at 103 plus accrued interest $3,000,000, 9% bonds. The bonds are dated January 1, 2008, and pay interest semiannually on July 1 and January 1. In addition, Heide Co. incurred $27,000 of bond issuance costs. Compute the net amount of cash received by Heide Co. as a result of the issuance of these bonds.
2. On January 1, 2007, Reymont Co. issued 9% bonds with a face value of $500,000 for $469,280 to yield 10%. The bonds are dated January 1, 2007, and pay interest annually. What amount is reported for interest expense in 2007 related to these bonds, assuming that Reymont used the effective interest method for amortizing bond premium and discount?
3. Czeslaw Building Co. has a number of long-term bonds outstanding at December 31, 2008. These long-term bonds have the following sinking fund requirements and maturities for the next 6 years.
Sinking Fund Maturities
2009 $300,000 $100,000
2010 100,000 250,000
2011 100,000 100,000
2012 200,000 -
2013 200,000 150,000
2014 200,000 100,000
4. Indicate how this information should be reported in the financial statements at December 31, 2008.
5. In the long-term debt structure of Marie Curie Inc., the following three bonds were reported: mortgage bonds payable $10,000,000; collateral trust bonds $5,000,000; bonds maturing in installments, secured by plant equipment $4,000,000. Determine the total amount, if any, of debenture bonds outstanding.
The solution explains various questions relating to bond computations with calculations in the attached Word document.