Question

Myriad Solutions, Inc. issued 10% bonds, dated January 1, with a face amount of $500 million on January 1, 2021, for $442,648,000. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31.

Required: Calculate the amounts related to the bonds that Myriad would report in its financial statements. (Round your answers to the nearest whole dollar.)
Net liability
Financing

Answer 1

on the balance sheet, Myriad Solutions should report net long term liabilities = $445,859,293

on the income statement, Myriad Solutions should report total interest expense related to the bonds = $53,211,293

Step-by-step explanation:

January 1, 202x, bonds are issued at a discount

Dr Cash 442,648,000

Dr Discount ob bonds payable 57,352,000

Cr Bonds payable 500,000,000

June 30, 202x, first coupon payment

Dr Interest expense 26,558,880

Cr Cash 25,000,000

Cr Discount on bonds payable 1,558,880

(442,648,000 x 6%) - 25,000,000 = 1,558,880

December 31, 202x, second coupon payment

Dr Interest expense 26,652,413

Cr Cash 25,000,000

Cr Discount on bonds payable 1,652,413

(444,206,880 x 6%) - 25,000,000 = 1,652,413

bonds' carrying value = $445,859,293

total interest expense related to the bonds = $26,558,880 + $26,652,413 = $53,211,293