In the following two independent cases, the company closes its books on December 31: Skysong Inc. sells $2.08 million of 8% bonds on March 1, 2023. The bonds pay interest on September 1 and March 1. The bonds' due date is September 1, 2026. The bonds yield 10%. 1. 2. Headlands Ltd. sells $6.40 million of 9% bonds on June 1, 2023. The bonds pay interest on December 1 and June 1. The bonds' due date is June 1, 2027. The bonds yield 8%. On October 1, 2024, Headlands buys back $1.28 million worth of bonds for $1.86 million, including accrued interest.
In the following two independent cases, the company closes its books on December 31: Skysong Inc. sells $2.08 million of 8% bonds on March 1, 2023. The bonds pay interest on September 1 and March 1. The bonds' due date is September 1, 2026. The bonds yield 10%. 1. 2. Headlands Ltd. sells $6.40 million of 9% bonds on June 1, 2023. The bonds pay interest on December 1 and June 1. The bonds' due date is June 1, 2027. The bonds yield 8%. On October 1, 2024, Headlands buys back $1.28 million worth of bonds for $1.86 million, including accrued interest.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:In the following two independent cases, the company closes its books on December 31:
Skysong Inc. sells $2.08 million of 8% bonds on March 1, 2023. The bonds pay interest on September 1 and March 1. The
bonds' due date is September 1, 2026. The bonds yield 10%.
1.
2.
Headlands Ltd. sells $6.40 million of 9% bonds on June 1, 2023. The bonds pay interest on December 1 and June 1. The
bonds' due date is June 1, 2027. The bonds yield 8%. On October 1, 2024, Headlands buys back $1.28 million worth of bonds
for $1.86 million, including accrued interest.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
Prepare all of the relevant journal entries from the time of sale until the date indicated.
(a1)
For situation 1. prepare the journal entries through December 31, 2024. Assume that no reversing entries were made. Use the
amounts arrived at from using (1) factor tables, (2) a financial calculator, or (3) Excel function PV from the time of sale until the
date indicated. Use the effective interest method for discount and premium amortization. (Hint: Refer to Chapter 3 for tips on
calculating) (Round present value factor calculations to 5 decimal places, eg 1.25124 and final answer to O decimal places eg. 58,971.
Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No
Entry for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. Listall debit entries
before credit entries)
Date
Account Titles and Explanation
Debit
Credit
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