Answered: 26. A company issued 10-year, 9% bonds… | bartleby

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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**Problem 26:**

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Using the effective interest method, prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium. (Round answers to the nearest dollar)

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Diaz Company issued bonds with a face value of $180,000 on January 1, Year 1. The bonds had a stated interest rate of 7 percent and a five-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 98. The straight- line method is used for amortization. Required a. Use a financial statements model to demonstrate how (1) the January 1, Year 1, bond issue and (2) the December 31, Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financial statements. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 2 e. Determine the amount of interest expense reported on the Year 2 income statement. Complete…
On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: Multiple Choice Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. Debit Bond Interest Expense $28,000; credit Cash $28,000. Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200. Debit Bond Interest Expense $14,000; credit Cash $14,000.
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3. On July 1, 2018, Volunteer Inc. issued bonds with a $500,000 face value at 108.0 and the 5-year bonds have a 10% interest rate in a market with a rate of 8%. Interest is payable semi-annually and the effective-interest method is used for amortization. Prepare journal entries for the following transactions. Premium on Bonds Payable Interest Income Discount on Bonds Payable Interest Expense Cash Bonds Payable PLEASE NOTE: For each of the following journal entries there is one account's treatment (DR or CR), that depends on whether it is a bond issued at a premium or a discount. You are to identify if it is a DR or a CR. You must enter the account names exactly as written above and all dollar amounts will be rounded to whole dollars with "$" and commas as needed (i.e. $12,345). July 1, 2018: to record issuing the bonds DR DR/CR ? CR Dec. 31, 2018: to record the amortization & payment of interest to bondholders: DR…
On 10/1/X1, Openshaw, Inc issued $1,000,000 of bonds at a price of 98. Assuming the bonds have a 3-year term and bear interest at an annual stated rate of 6% payable semi-annually. What is the 12/31/X1 adjusting journal entry to record interest (using the straight line method?) а. Interest Expense $66,667 Interest Payable 60,000 Bond Premium 6,667 Interest Expense $16,667 Interest Payable 15,000 Bond Discount 1,667 C. Interest Expense $66,667 Interest Payable 60,000 Bond Discount 6,667 d. Interest Expense $16,667 Interest Payable 15,000 Bond Premium 1,667 d O O
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. On 1/1/21, Ehrlich Co. issued 4 year bonds with a face value of $700,000. The stated (bond) rate is 8%, payable semiannually on 1/1 and 7/1. The market rate at the time of issuance was 10%. a. Calculate the issue price of the bonds. b. Prepare the journal entry for the issuance of the bonds. c. Complete the amortization table below. Date cash paid interest expense amortization carrying value 1/1/21 7/1/21 1/1/22 7/1/22 d. Prepare the journal entries for the 7/1/21 interest payment and amortization, 12/31/21 interest accrual and amortization, and 1/1/22 interest payment. e. Prepare the journal entry for retirement of the bonds at maturity f. Assume instead that the bonds were redeemed on 7/1/22 at 102. Prepare the journal entry.
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