Analyzing and Reporting Financial Statement Effects of Bond Transactions Lundhol

Question

Analyzing and Reporting Financial Statement Effects of Bond Transactions
Lundholm, Inc., reports financial statements each December 31 and issues $500,000, 11%, 15-year bonds dated May 1, 2012, with interest payments on October 31 and April 30. Assuming the bonds are sold at par on May 1, 2012, complete the financial statement effects template to reflect the following events: (a) bond issuance, (b) the first semiannual interest payment, and (c) retirement of $300,000 of the bonds at 101 on November 1, 2012.

Balance Sheet

0.00 points out of 1.00

Income Statement

Balance Sheet

Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital (a) Answer Answer Answer Answer Answer (b) Answer Answer Answer Answer Answer (c) Answer

0.00 points out of 1.00

Answer Answer Answer Answer

Explanation / Answer

Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital (a) 500000 0 500000 0 0 (b) 0 0 27500 0 0 (c) 0 0 0 303000 0 Income Statement Revenue - Expenses = Net Income a 0 0 0 b 0 27500 -27500 c 0 0 0 Bond issue and retirement doesnot come in income statements only the interest payment is deducted from EBIT Bond Face value 500000 Interest payment per 6 month 27500 Bond retirement 300000 303000

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