Purchase Solution

# Issuance, Classification, Reporting of Bonds

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Presented below are four independent situations.

(a) On March 1, 2008, Heidi 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, Heidi Co. incurred \$27,000 of bonds issuance costs. Compute the net amount of cash received by Heidi Co. as a result of the issuance of these bonds. CHECK FIGURE AMOUNT SAYS NET AMOUNT OF CASH \$3,108,000.

(b) On January 1, 2008, Reymont Co. issued 9% bonds with a face value of \$500,000 for \$469,280 to yield 10%. The bonds are dated January 1, 2008, and pay interest annually. What amount is reported as bond discount on the issue date?

(c)Czeslaw Building Co. has a number of long-term bonds outstanding at December 31, 2009. These long-term bonds have the following sinking fund requirements and maturities for the next 6 years.

Sinking Fund Maturities
------------ ----------
2010 \$300,000 \$100,000
2011 100,000 250,000
2012 100,000 100,000
2013 200,000 ---
2014 200,000 150,000
2015 200,000 100,000

Indicate how this information should be reported in the financial statements at December 31, 2009.

(d) 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.

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The solution explains the issuance, classification and reporting of bonds

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