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2. Downing Company issues $1,000,000, 8%, 10-year bonds on January 1, 2020. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 10%. a) Calculate the issue price of the bonds in dollars b) Calculate the issue price of the bonds as a percent c) Make the journal entry to record the sale of the bond

2. Downing Company issues $1,000,000, 8%, 10-year bonds on January 1, 2020. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 10%. a) Calculate the issue price of the bonds in dollars b) Calculate the issue price of the bonds as a percent c) Make the journal entry to record the sale of the bond

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. Downing Company issues $1,000,000, 8%, 10-year bonds on January 1, 2020. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 10%. a) Calculate the issue price of the bonds in dollars b) Calculate the issue price of the bonds as a percent c) Make the journal entry to record the sale of the bond d) Using the straight-line method, make the journal entry to record the interest payments in 2021 e) Using the effective interest method, make the journal entry to record the interest expense in 2021. Prepare the amortization table for 2020, 2021 and 2022. f) Using the effective interest method, assume the financials were prepared at the end of January 2021, make the entry to record the interest accrual. g) Using the effective interest method, make the entry to buy back the bond on December 31, 2021 at the different prices below: (i) $1,500,000 (ii) $500,000
Transcribed Image Text:2. Downing Company issues $1,000,000, 8%, 10-year bonds on January 1, 2020. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 10%. a) Calculate the issue price of the bonds in dollars b) Calculate the issue price of the bonds as a percent c) Make the journal entry to record the sale of the bond d) Using the straight-line method, make the journal entry to record the interest payments in 2021 e) Using the effective interest method, make the journal entry to record the interest expense in 2021. Prepare the amortization table for 2020, 2021 and 2022. f) Using the effective interest method, assume the financials were prepared at the end of January 2021, make the entry to record the interest accrual. g) Using the effective interest method, make the entry to buy back the bond on December 31, 2021 at the different prices below: (i) $1,500,000 (ii) $500,000
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