Campbell Inc. produces and sells outdoor equipment. On July 1, Year 1, Campbell Inc. issued $84,100,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $94,580,761. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.Required:1.Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.*2.Journalize the entries to record the following:*a.The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)b.The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)3.Determine the total interest expense for Year 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.CHART OF ACCOUNTS Campbell Inc. General Ledger ASSETS110Cash111Petty Cash121Accounts Receivable122Allowance for Doubtful Accounts126Interest Receivable127Notes Receivable131Merchandise Inventory141Office Supplies142Store Supplies151Prepaid Insurance191Land192Store Equipment193Accumulated Depreciation-Store Equipment194Office Equipment195Accumulated Depreciation-Office Equipment LIABILITIES210Accounts Payable221Salaries Payable231Sales Tax Payable232Interest Payable241Notes Payable251Bonds Payable252Discount on Bonds Payable253Premium on Bonds Payable EQUITY311Common Stock312Paid-In Capital in Excess of Par-Common Stock315Treasury Stock321Preferred Stock322Paid-In Capital in Excess of Par-Preferred Stock331Paid-In Capital from Sale of Treasury Stock340Retained Earnings351Cash Dividends352Stock Dividends390Income Summary 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year Refer to the Chart of Accounts for exact wording of account titles.2a. Journalize the entry to record the first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles.2b. Journalize the entry to record the interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles.

Bonds payable refers to a type of long-term debt that a company or organization issues to borrow…

Answered: Campbell Inc. produces and sells…

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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Campbell Inc. produces and sells outdoor equipment. On July 1, Year 1, Campbell Inc. issued $84,100,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $94,580,761. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.*

Journalize the entries to record the following:*

a.	The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)
b.	The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)

Determine the total interest expense for Year 1.

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?

CHART OF ACCOUNTS

Campbell Inc.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
126	Interest Receivable
127	Notes Receivable
131	Merchandise Inventory
141	Office Supplies
142	Store Supplies
151	Prepaid Insurance
191	Land
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Salaries Payable
231	Sales Tax Payable
232	Interest Payable
241	Notes Payable
251	Bonds Payable
252	Discount on Bonds Payable
253	Premium on Bonds Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year Refer to the Chart of Accounts for exact wording of account titles.

2a. Journalize the entry to record the first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles.

2b. Journalize the entry to record the interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles.

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5. Compute the price of $94,580,761 received for the bonds by using the tables shown in Present Value Tables. (Round to the nearest dollar.)


Present value of the face amount
Present value of the semiannual interest payments
Price received for the bonds

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