Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $54,100,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $60,842,083. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1. Cash Cash Premium on Bonds Payable Premium on Bonds Payable Bonds Payable Bonds Payable Feedback Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Interest Expense Interest Expense Premium on Bonds Payable Premium on Bonds Payable Cash Cash Feedback The straight-line method of amortization provides equal amounts of amortization over the life of the bond. b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Interest Expense Interest Expense Premium on Bonds Payable Premium on Bonds Payable Cash Cash Feedback The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 3. Determine the total interest expense for 20Y1. Round to the nearest dollar. $fill in the blank 6b615d0affd8065_1
Bond Premium, Entries for Bonds Payable Transactions
Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $54,100,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $60,842,083. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
For all
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.
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Cash | Cash | |
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Premium on Bonds Payable | Premium on Bonds Payable | |
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Bonds Payable | Bonds Payable |
Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.
|
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Interest Expense | Interest Expense | |
|
|
Premium on Bonds Payable | Premium on Bonds Payable | |
|
|
Cash | Cash |
The straight-line method of amortization provides equal amounts of amortization over the life of the bond.
b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.
|
|
Interest Expense | Interest Expense | |
|
|
Premium on Bonds Payable | Premium on Bonds Payable | |
|
|
Cash | Cash |
The straight-line method of amortization provides equal amounts of amortization over the life of the bond.
3. Determine the total interest expense for 20Y1. Round to the nearest dollar.
$fill in the blank 6b615d0affd8065_1
4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?
5. Compute the price of $60,842,083 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.
| Present value of the face amount | $fill in the blank 6b615d0affd8065_3 |
| Present value of the semi-annual interest payments | fill in the blank 6b615d0affd8065_4 |
| Price received for the bonds | $fill in the blank 6b615d0affd8065_5 |
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