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    Intermediate Accounting 2 Quiz #2

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    Claire Magbunag Antido
    This document provides instructions and problems for an Intermediate Accounting 2 quiz. It includes 4 problems related to accounting for bonds payable, convertible bonds, and bond conversions. Students are asked to show their work and solutions. The deadline to submit solutions online or by hardcopy is June 22, 2020 by 12:00 Noon. It encourages students to commit their plans to the Lord.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Intermediate Accounting 2 Quiz #2

    Uploaded by

    Claire Magbunag Antido
    476 views1 page
    This document provides instructions and problems for an Intermediate Accounting 2 quiz. It includes 4 problems related to accounting for bonds payable, convertible bonds, and bond conversions. Students are asked to show their work and solutions. The deadline to submit solutions online or by hardcopy is June 22, 2020 by 12:00 Noon. It encourages students to commit their plans to the Lord.

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    This document provides instructions and problems for an Intermediate Accounting 2 quiz. It includes 4 problems related to accounting for bonds payable, convertible bonds, and bond conversions. Students are asked to show their work and solutions. The deadline to submit solutions online or by hardcopy is June 22, 2020 by 12:00 Noon. It encourages students to commit their plans to the Lord.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    476 views1 page

    Intermediate Accounting 2 Quiz #2

    Uploaded by

    Claire Magbunag Antido
    This document provides instructions and problems for an Intermediate Accounting 2 quiz. It includes 4 problems related to accounting for bonds payable, convertible bonds, and bond conversions. Students are asked to show their work and solutions. The deadline to submit solutions online or by hardcopy is June 22, 2020 by 12:00 Noon. It encourages students to commit their plans to the Lord.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Intermediate Accounting 2 Quiz #1 Instructor: Ray Patrick S.

    Guangco, CPA
    Coverage: Chapter 5, Chapter 6 and Chapter 7
    PROBLEM SOVLING
    INSTRUCTION: Answer the following problems below. SHOW YOUR SOLUTION. NO OR WRONG SOLUTION WILL NOT BE
    CONSIDERED.

    Submission: You may submit online through this email [email protected] in .doc or .docx file entitled Intermediate Accounting 2 Quiz
    #2 or you may submit a hardcopy to my office.

    Deadline: June 22, 2020, Monday 12:00 Noon

    Problem 1
    The Beautiful Corporation issued P800,000 of 12% face value bonds for P851,705.70. The bonds were dated and issued on April 1, 2011, are
    due March 31, 2015, and pay interest semiannually on September 30 and March 31. The company sold the bonds to yield 10%.
    Required:
    1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. (5 points)
    2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. (5 points)
    3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2011, using:
    a. The straight-line method of amortization. (2 points)
    b. The effective interest method of amortization. (2 points)
    4. Assume the company retires the bonds on June 30, 2012, at 102 plus accrued interest. Prepare the journal entries to record the bonds
    retirement using:
    a. The straight-line method of amortization. (2 points per entry)
    b. The effective interest method of amortization. (2 points per entry)

    Problem 2
    Ormoc Company issued bonds payable with warrants of 4,000, 10% 5-year bonds, face value of P1,000 at 98 on January 1, 2018. Each bond
    is accompanied by warrant that permits the bondholder to purchase 20 shares of common stock, part P50, at P55 per share. The nominal rate
    is payable annually on December 31. The bonds mature on December 31, 2022. When the bonds are issued, the prevailing market rate of
    interest for similar bonds without warrants is 12% per annum.
    Required: Based on the preceding information, determine the following: (Round off present value factors to four decimal places)
    1. Amount allocated to warrants (2 points)
    2. Interest expense in 2018. (2 points)
    3. Carrying value of the bonds payable at December 31, 2018. (2 points)
    4. Net effect to equity assuming 60% of warrants were exercised. (2 points)
    5. Net effect to equity assuming the other 40% of warrants expired. (2 points)

    Problem 3
    On January 1, 2014, Dias Company issued 3-year, 4,000 convertible bonds at face value of P1,000 per bond. Interest is to be paid annually in
    arrears at the stated coupon rate of 6%. Each bond is convertible, at the holder’s option, into 200 P2 par value ordinary shares at any time up
    to maturity. On the date of issuance, the prevailing market interest rate for similar debt without the conversion privilege was 9%. On the same
    date, the market price of one ordinary share was P3. The bonds were converted on December 31, 2015. The following present value factors ar
    obtained from the present value tables:
    6% 9%
    Present value of 1 for 3 periods 0.83962 0.77218
    Present value of an ordinary annuity of 1 for 3 periods 2.67301 2.53130
    Present value of an annuity due of 1 for 3 periods 2.83339 2.75911
    Required:
    1. The liability component of the convertible debt is _____________. (2 points)
    2. The equity component of the convertible debt is _____________. (2 points)
    3. The interest expense to be reported on Dias Company’s income statement for the year ended December 31, 2015, is _______. (2 points)
    4. The entry to record the bond conversion on December 31, 2015. (2 points)

    “Commit to the Lord whatever you do, and he will establish your plans.”

    Proverbs 16:3

    Acctg 5: Intermediate Accounting 2 Page 1 of 1

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