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· After reading the information on accounting for long-term debt in Chapter 14 from your Intermediate Accounting text, use a Word or an Excel document to address the following problems:
o P 14-1, “Determining the Price of Bonds; Discount and Premium; Issuer and Investor,” page 817.
§ This problem tests your knowledge of bond issuance pricing.
o P 14-10, “Notes Exchanged for Assets; Unknown Effective Rate,” page 819.
§ This problem tests your knowledge of exchanging notes for assets.
o P 14-21, “Concepts; Terminology,” page 822.
§ This problem tests your knowledge of the concepts and terminology associated with long-term debt instruments. List each of the numbers from list A, followed by the correct matching letter from list B. No calculations are necessary for this problem.
P 14–1
Determining the price of bonds; discount and premium; issuer and investor
• LO14–2
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $50 million, dated January 1. The bonds mature in 2037 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually.
Required:
1. Determine the price of the bonds at January 1, 2018, and prepare the journal entry to record their issuance by Instaform.
2. Assume the market rate was 9%. Determine the price of the bonds at January 1, 2018, and prepare the journal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt.
P 14–10
Notes exchanged for assets; unknown effective rate
• LO14–3
At the beginning of the year, Lambert Motors issued the three notes described below. Interest is paid at year-end.
1. The company issued a two-year, 12%, $600,000 note in exchange for a tract of land. The current market rate of interest is 12%.
2. Lambert acquired some office equipment with a fair value of $94,643 by issuing a one-year, $100,000 note. The stated interest on the note is 6%.
3. The company purchased a building by issuing a three-year installment note. The note is to be repaid in equal installments of $1 million per year beginning one year hence. The current market rate of interest is 12%.
P 14–21
Concepts; terminology
• LO14–1 through LO14–5
Listed below are several terms and phrases associated with long-term debt. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it.
List A
List B
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