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Question 1

Bond issue journal entries for borrower ( premium)

Answer 1

Dr Cash
Cr premium
Cr Bond payable

2- to record the interest expenses

Dr interest expense
DR premium
Cr Cash

Question 2

Bond issue journal entries for lender ( premium)

Answer 2

Dr investment in bond
Cr Cash

2- to record the interest revenue

Dr Cash
Cr interest revenue
Cr investment in bond

Question 3

Bond issue journal entries for borrower ( discount)

Answer 3

Dr cash
Dr discount on bond
Cr bond payable

2- to record the interest expense

Dr interest expense
Cr Cash
Cr discount on bond

Question 4

Bond issue journal entries for lender ( Discount)

Answer 4

Dr investment on bond
Cr cash

2- to record the interest

Dr cash
Dr investment on bond
Cr interest revenue

Question 5

entries for convertible Bond ( book Value ) no Datchable ( Borrower)

Answer 5

Dr cash
Cr bond payable
Cr premium

to convert them

Dr bond payable
Dr premium
Cr Common stock
Cr APIC

Question 6

entries for convertible Bond ( market value ) no Datchable ( Borrower)

Answer 6

to convert them

Dr bond payable
Dr premium
Dr Loss on conversion ( Plug)
Cr Common stock
Cr APIC.

Question 7

entries for detachable warranty ( Warranty method )

Borrower

Answer 7

Dr cash
Dr Discount on bond
Cr Bond payable
Cr APIC ( Warranty)

2- exercise them

Dr Cash
Dr APIC ( warranty(
CR common stock
CR APIC

3- Expire them

DR APIC warranty
Cr APIC

Question 8

entries for detachable warranty ( market value method )

Borrower

Answer 8

Dr Cash
Dr Discount on bond payable
Cr Bond payable
CR APIC warranty

2- exercise them
Dr cash
Dr APIC ( Warranty)
Cr common stock
Cr APIC

Question 9

Extenguishment ( retirement )of the Dept

Answer 9

Requisition price = Face * % paid
minus 
carrying value
Face
- unamortized discount
\+ Unamotized premium
- unamortized issue cost 

the entries 
Dr Bond payable
Dr Loss in exitnguishment of bond
Cr discount on bond payable
Cr unamortized cost
Cr Cash

Question 10

Restruction of Dept ( transfer of asset )

Answer 10

transfer of asset

Dept forgiven - carrying value= Gain

break out the gain
1- gain in disposal
FV of the property
- acquisition cost of the property

2- gain in restriction
amount owed
- FV of the property

the entry

Dr notes payable
DR interest payable 
Cr the asset
Cr gain in disposal
Cr gain in restruction

Question 11

Restruction of Dept ( transfer ofEquity )

Answer 11

carrying amount - FV of equity

the entry

Dr notes payable 
Dr interest payable
Cr Common stock
Cr APIC
Cr Gain in restruction

Question 12

Restruction of Dept ( modification of term ) for brrower

Answer 12

carrying amount - total future cash payment

the entry

Dr notes payable
Dr Interest payable
Cr Notes payable
Cr Gain on restruction

Question 13

Restruction of Dept ( modification of term ) for the creditor

Answer 13

P.v of cash flow
- carrying value ( Principle the inetrset ) =
impairment of loan

Dr notes payable
Dr Bad dept expense 
Cr valuation allowance ( Impairment of loan)
Cr note receivable 
Cr accrued interest receivable

Question 14

An entity, upon initial recognition of an asset retirement obligation, should not take which of the following actions?

Answer 14

The fair value of the asset retirement cost is initially measured by using an expected present value technique. The liability recognized equals the present value of the future cash flows expected to be paid to settle the obligation discounted at the credit-adjusted risk-free rate.

Question 15

When purchasing a bond, the present value of the bond’s expected net future cash inflows discounted at the market rate of interest provides what information about the bond?

Answer 15

The issue price of a bond is based on the market interest rate and reflects its fair value. The proceeds received from the sale of a bond equal the sum of the present values of the face amount and the interest payment (if the bond is interest-bearing). When bonds are issued between interest payment dates, the buyer includes accrued interest in the purchase price.

Question 16

The best advantage of a zero-coupon bond to the issuer is that the

Answer 16

Zero-coupon bonds do not pay periodic interest. The bonds are sold at a discount from their face value, and the investors do not receive interest until the bonds mature. The issuer does not have to make annual cash outlays for interest. However, the discount must be amortized annually and reported as interest expense.
in other words Interest can be amortized annually on a straight-line basis but is a noncash outlay

Question 17

Comparison of Effective Interest and Straight-Line Amortization Methods

Answer 17

Comparison of Effective Interest and Straight-Line Amortization Methods

Method of Amortization Interest Revenue/Expense Interest Rate**
Effective interest method Changes each period* Constant each period
Straight-line method Constant each period Changes each period

• Carrying amount of the bond investment or bonds payable at the beginning of the interest period multiplied times the yield rate
  ** Interest revenue/expense for a period divided by the carrying amount of the bond investment or bond liability at the beginning of the interest period
  The following table summarizes the various behavior patterns related to the use of the effective interest method:

Question 18

for the amortization

Answer 18

1-Interest revenue/expense
Discount 
increase each period 
Premium
decrease each period
2- Amount of amortization
Discount
increase each period
premium
increase each period
3- Carrying amount of bonds payable/investment in bonds
Discount
increase each period
premium
decrease each period

Question 19

Which of the following is generally associated with the terms of convertible debt securities?

Answer 19

This answer is correct because convertible debt generally will have an interest rate that is lower than nonconvertible debt.

Question 20

On March 1, year 1, Playa Corporation issued bonds with a fair value of $1,000,000. Playa prepares its financial statements in accordance with IFRS.

What methods may Playa use to report the bonds on its December 31, year 1 statement of financial position?

Answer 20

This answer is correct. IFRS provides that financial liabilities may be reported at amortized cost or at the fair value through profit or loss (FVTPL). If FVTPL is elected, the resulting gain or loss is recognized in profit or loss for the period.