On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $168 million. The bonds were priced at $147.2 million to yield 12%. Interest is paid semiannually on June 30 and December 31. Baddour's fiscal year ends September 30. Required: 1. What amount (s) related to the bonds would Baddour report in its balance sheet at September 30, 2018? 2. What amount (s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2018? 3. What amount (s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2018? In which section (s) should the amount (s) appear?

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Business

Hugh Weiss

24 March, 00:57

On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $168 million. The bonds were priced at $147.2 million to yield 12%. Interest is paid semiannually on June 30 and December 31. Baddour's fiscal year ends September 30. Required: 1. What amount (s) related to the bonds would Baddour report in its balance sheet at September 30, 2018? 2. What amount (s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2018? 3. What amount (s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2018? In which section (s) should the amount (s) appear?

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Devin · Answer 1

(A) Balance sheet

Bonds at September 30th

Bonds Payable 168,000,000

Discount on Bonds (20,152,000)

Interest Payable 12,600,000

Net 160,448,000

(B) Income Statment

Interest Expense 13,248,000

(C) Cash Flow Statment

Financing

Cash generate for Bonds issued 147,200,000

Explanation:

Jan 1st, 2018 168,000,000 face value

Issed at 147.2M for an effective rate of 12%

Discount of 20.8M

Bonds at September 30th

accrued interest expense: 147,200,000 x 12% x 9/12 = 13,248,000

interest payable: 168,000,000 x 10% x 9/12 = 12,600,000

amortization of Discount: 648,000