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a) On April 1, 2023, Kaur Company issued $1,000,000 face value, 16.3%, ten-year bonds. The market rate of interest was 16%. Interest is paid semi-annually on April 1st and October 1st. Kaur Company has a December 31st fiscal year-end. Round all calculations to the nearest dollar. Instructions: 1. Prepare all the necessary journal entries related to the above bonds for Kaur Company for 2023. 2. Prepare the journal entry by Kaur Company to record the bond interest payment on April 1, 2024. 3. Kaur Company subsequently decided to redeem the bonds on April 1,2024 ( after all interest owing to the bondholders was paid) at 102. Prepare the necessary journal entry to record the redemption of the bonds on this date.

a) On April 1, 2023, Kaur Company issued $1,000,000 face value, 16.3%, ten-year bonds. The market rate of interest was 16%. Interest is paid semi-annually on April 1st and October 1st. Kaur Company has a December 31st fiscal year-end. Round all calculations to the nearest dollar. Instructions: 1. Prepare all the necessary journal entries related to the above bonds for Kaur Company for 2023. 2. Prepare the journal entry by Kaur Company to record the bond interest payment on April 1, 2024. 3. Kaur Company subsequently decided to redeem the bonds on April 1,2024 ( after all interest owing to the bondholders was paid) at 102. Prepare the necessary journal entry to record the redemption of the bonds on this date.

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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a) On April 1, 2023, Kaur Company issued $1,000,000 face value, 16.3%, ten-year bonds. The market rate of interest was 16%. Interest is paid semi-annually on April 1st and October 1st. Kaur Company has a December 31st fiscal year-end. Round all calculations to the nearest dollar. Instructions: 1. Prepare all the necessary journal entries related to the above bonds for Kaur Company for 2023. 2. Prepare the journal entry by Kaur Company to record the bond interest payment on April 1, 2024. 3. Kaur Company subsequently decided to redeem the bonds on April 1,2024 (after all interest owing to the bondholders was paid) at 102. Prepare the necessary journal entry to record the redemption of the bonds on this date. b) On January 1, 2023, Peng Contracting (lessee) signed an agreement to lease a crane from Raha Supply (lessor )for a period of three years. The lease contract requires payments of $10,000 on December 31st of 2023, 2024 and 2025. The crane can be purchased by Peng at the end of the lease for a nominal (i.e. very small) amount. The crane has an estimated economic life of 6 years. The market rate of interest was 10% at the time of signing the lease. The fair market value of the crane at the time of signing the agreement was $29,000. Peng is a private company following ASPE. Instructions: 1. How will this lease be classified by Peng? Explain. 2. Prepare the journal entry, if any, by Peng on January 1st, 2023 to record the lease agreement.
Transcribed Image Text:a) On April 1, 2023, Kaur Company issued $1,000,000 face value, 16.3%, ten-year bonds. The market rate of interest was 16%. Interest is paid semi-annually on April 1st and October 1st. Kaur Company has a December 31st fiscal year-end. Round all calculations to the nearest dollar. Instructions: 1. Prepare all the necessary journal entries related to the above bonds for Kaur Company for 2023. 2. Prepare the journal entry by Kaur Company to record the bond interest payment on April 1, 2024. 3. Kaur Company subsequently decided to redeem the bonds on April 1,2024 (after all interest owing to the bondholders was paid) at 102. Prepare the necessary journal entry to record the redemption of the bonds on this date. b) On January 1, 2023, Peng Contracting (lessee) signed an agreement to lease a crane from Raha Supply (lessor )for a period of three years. The lease contract requires payments of $10,000 on December 31st of 2023, 2024 and 2025. The crane can be purchased by Peng at the end of the lease for a nominal (i.e. very small) amount. The crane has an estimated economic life of 6 years. The market rate of interest was 10% at the time of signing the lease. The fair market value of the crane at the time of signing the agreement was $29,000. Peng is a private company following ASPE. Instructions: 1. How will this lease be classified by Peng? Explain. 2. Prepare the journal entry, if any, by Peng on January 1st, 2023 to record the lease agreement.
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