Exercise 9-71 (Algorithmic)Interest Payments and Interest Expense for Bonds (Straight Line)On January 1, 2020, Harrington Corporation sold $100,000 of 15-year, 11% bonds. The bonds sold for $96,000 and pay interestsemiannually on June 30 and December 31.Required:1. Prepare the journal entry to record the sale of the bonds.2020 Jan. 31Record issuance of bonds at discount2. Calculate the amount of the cash semiannual interest payment. Round your answer to the nearest whole dollar, if required.3. Prepare the entry at June 30, 2020, to recognize the payment of interest and interest expense. Round your answers to thenearest whole dollar, if required.2020 June 30Record interest expense4. Calculate the annual interest expense for 2020. Round your answer to the nearest whole dollar, if required.

Interest Payments and Interest Expense for Bonds (Straight Line) On January 1, 2020, Harrington Corporation sold $100,000 of 15-year, 11% bonds. The bonds sold for $96,000 and pay interest semiannually on June 30 and December 31.

Interest Payments and Interest Expense for Bonds (Straight Line) On January 1, 2020, Harrington Corporation sold $100,000 of 15-year, 11% bonds. The bonds sold for $96,000 and pay interest semiannually on June 30 and December 31.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: On April 1, 2020, Lucky Corp. purchased P1,000,000 face amount 12% bonds at 94. Bonds pay interest…

A: Bonds represent the loan for the company on which a percentage of interest has to be paid by the…

Q: Un 1/1/2020, Blue Company issued 5-year, 9% bonds with a par value of $1,000,000 The company…

A: Bond is an instrument which is issued at par, discount or at premium. When company required the…

Q: Help Seve & E On January 1, 2021, Lambda, Inc. issued ten-year bonds with a face value of $1.000.000…

A: Par Value of the bonds = $1,000,000 Semi-annual Interest payment = 1,000,000 x 8% ÷ 2…

Q: On January 1, 2021, Lyle’s Limeade issues 4%, 10-year bonds with a face amount of $90,000 for…

Q: On October 1, 2020 Sunland Company issued 4%, 10-year bonds with a face value of $6110000 at 104.…

A: Interest accrued for 3 months ( From October 1st to December 31) = Face value × interest rate ×…

Q: ABC Company issued $2,000,000 face value of bonds at 95 on January 1, 2021.The company incurred bond…

A: Journal entry: A journal entry is used to record day-to-day transactions of the business by…

Q: On January 1, 2020, Drew Company issued $900,000, 5-year bonds for $828,000. The stated rate of…

A: Annual Cash Payment for interest = Face value of bonds x rate of interest x period = $900,000 x 9% =…

Q: Reporting Bonds on the Balance Sheet Yale Corporation issued to Zap Corporation $300,000, 8% (cash…

A: Introduction: A balance sheet is a financial statement that includes a company's assets,…

Q: On January 1, 2021, a company issues 3-year bonds with a face value of $50,000 and a stated interest…

A: Interest expense = Issue price of bond × Market interest rate Cash paid = face value×stated interest…

Q: A company sold bonds on January 1, 2021, for $207,913. This price represents a market rate of 9% on…

A: Bonds sold at premium: When the bonds are sold at a price more than its face value then the excess…

Q: On July 1, 2018, McNamara Company issued for $598,964, 10%, 20-year bonds with a face value of…

A: When bonds are issued at premium the premium on bonds payable is amortized over the life of the…

Q: On January 1, 2020, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000. Interest is paid…

Q: On January 1st, 2021, Lemon Corporation issued $800,000 of 20 year 10% bond at 104. Interest was…

A: Bonds are a form of loan or debt issued by the company, on which it has to make interest payments.…

Q: Presented below is a partial amortization table: Semi Annual Interest Period Jan 1, 2026 July 1,…

A: Bonds - Bonds are fixed-income securities that reflect loans from investors to borrowers (typically…

Q: owe subject-Accounting On May 1, 2024, crane corp. issued 955,000 of 5-year, 7% bonds at $916,270.…

A: Each periodic payment on bonds is listed in a table called an amortization schedule over the course…

Q: In the statement of financial position of Leblanc Company as of December 31, 2020, the following…

A: Redemption of the bonds = Face value of Bonds Payable x Redemption value / 100 = P1,000,000 x 98/100…

Q: Swiss Inc. sold 20-year bonds with a total face amount of $401,000 and a stated rate of 7.5%. The…

A: "Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: On Dec. 31, 2020, ABC Corp issued 4-year, 7% bonds with $2,000,000 as par value. ABC Corp. received…

A: Lets understand the basics. When bond is issued at more than its par value then it is known as…

Q: On January 1, 2021. Aloha corporation issued $300,000, 3%, 5-years bonds at 97 (a discount of…

A: Par Value of Bonds Payable $300000 Issue price of the Bond at 97% = $291000 Discount on…

Q: Pharoah Company issued $380,000 of 6%, 20-year bonds on January 1, 2022, at face value. Interest is…

A: 20- Year 6% Bond =. $380,000 Interest Rate =6% Interest Payable on January 1.

Q: Determine the present value of the bonds at issuance.

A: Bond valuation is the process of finding the fair value of the bond. It means to find the present…

Q: Bonds Issued at a Premium (Effective Interest) Cookie Dough Corporation issued $1,500,000 in 7%,…

A: Bonds payable: It is a long term liability to the organization issuing it. It is issued to raise…

Q: On January 1, 2021, Ganda Company issued P5,000,000, 8% serial bonds payable to be repaid in the…

A: Interest expense on December 31, 2021 = present value of the bonds x yield rate x no. of the months…

Q: On November 1, 2018, Sigma Inc. invests in $1,000,000 of 5%, 10-year bondsissued by Microsoft…

A: Correct Option is “a”: Interest Revenue. After Investing in November 2018, the interest revenue will…

Q: E-Tech Initiatives Limited plans to issue $550,000, 10-year, 3 percent bonds. Interest is payable…

A: The bonds have a face value of $500,000 and are issued at 95% of the face value.Issue Price = Face…

Q: On January 1, 2021, Sunland Company sold $4900000 of its 10% bonds for $4337950 to yield 12%.…

A: $4,337,950 is the present value of bond. Yield is 12 %, semiannually.

Q: On Dec. 31, 2020, Zallag company issues callable bonds that havea $700,000 par value, mature in 10…

A: Bonds are the amount company borrowed from the investors for a fixed income and for a period of…

Q: crane Corporation issued 2,100, 9%, 5-year, $1,000 bonds dated January 1, 2020, at 100. Interest is…

A: Cash received = 2,100 bonds x $1,000 per bond x 100% = $2,100,000

Q: On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $1,000,000 and a stated…

A: Bond- Bonds are debt securities issued by corporations, governments, or other organizations and sold…

Q: Awla Limited issued $1 million of 10-year, 5% bonds on January 1, 2021, when the market interest…

A: >Bonds Payable are the source of finance for the companies. >The bondholders are…

Q: b) What is the bonds’ face value? c) What will the bonds’ carrying amount be at the maturity date?…

A: Bond Amortization table is a year-wise summary of bond's carrying amount, interest expenses and…

Q: On January 1, 2021, Lambda, Inc. issued ten-year bonds with a face value of $1,000,000 and an annual…

A: Bonds issued at discount: Bonds are said to be issued at discount if the issue price is less than…

Q: On January 1, 2018, Paradiso Company issued 1,000 of its 8%, $1,000 bonds at 93. Interest is payable…

A: Bonds: Bonds are a kind of interest-bearing notes payable, usually issued by companies,…

Q: On January 1, 2018, Paradiso Company issued 1,000 of its 8%, $1,000 bonds at 93. Interest is payable…

A: Definition: Bonds: Bonds are a kind of interest-bearing notes payable, usually issued by…

Q: sheridan Limited issued $4,500,000 10-year, 8% bonds on January 1, 2021, when the market interest…

A: The bonds are issued at discount when market rate is higher than the coupon rate of bonds payable.…

Q: E-Tech Initiatives Limited plans to issue $550,000, 10-year, 3 percent bonds. Interest is payable…

A: Concept Introduction:Bonds: Bonds are debt instruments issued by the borrower company to its…

Q: McDorral Corporation issued $100,000 of 10%, 11-year bonds payable on January 1, 2020, for $92,480.…

A: Bonds :Bonds is a long-term debts issued by the government and companies to raise funds for their…

Q: On January 1, 2021, a company issues 3-year bonds with a face value of $160,000 and a stated…

A: Effective interest rate = 5%Therefore, interest expense to be @ market rate = 5% on the Market value…

Q: At January 1, 2020, Konerko Corp. issued $40,000,000 of 6%, 12-year bonds that paid interest…

A: Bonds: It is also known as fixed-income security, is a debt instrument created for the purpose of…

Q: on January 1, 2021. Friendly corporation issued $600,000, 4% 5-years bonds at 13 at 103. Interest is…

A: Answer with explanation are as follows

Q: BMT Company issued P5,000,000, 12%, 20-year bonds at 102 plus accrued interest on February 1, 2021.…

A: Accrued interest on the bonds company collect from the investor on February 1, 2021 = Face value of…

Q: On January 1, 2019, $40 million face amount of 5%, 20-year bonds were issued. The bonds pay interest…

A: Bond is issued by the companies in order to raise fund. The bondholders receive a fixed amount of…

Q: On Dec 31, 2020, ABC Corp issued 4-year, 7% bonds with $3,000,000 as par value. ABC Corp. received…

A: The bonds are issued at premium means that carrying value of bonds payable is more than the face…

Q: On January 1, 2020, Joe Construction issued $350,000, 3-year bonds for $320,000. The stated rate of…

A: Face Value of the bonds issued = $350,000Issue Price of the bonds = $320,000Stated Interest Rate =…

Q: Determining the present value of bonds payable and journalizing using the effective-interest…

A: Compute the issue price of bond payable as shown below: Present value factor (6%÷2) at 3% for 12…

Q: Kitkat Company issued a P5,000,000, 10% 10-year bonds on July 1, 2021 for 113 when the effective…

A: Issue value of bonds = Face value of bonds x issue price/100 = P5,000,000 x 113/100 = P5,650,000

Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Exercise 9-71 (Algorithmic)
Interest Payments and Interest Expense for Bonds (Straight Line)
On January 1, 2020, Harrington Corporation sold $100,000 of 15-year, 11% bonds. The bonds sold for $96,000 and pay interest
semiannually on June 30 and December 31.
Required:
1. Prepare the journal entry to record the sale of the bonds.
2020 Jan. 31
Record issuance of bonds at discount
2. Calculate the amount of the cash semiannual interest payment. Round your answer to the nearest whole dollar, if required.
3. Prepare the entry at June 30, 2020, to recognize the payment of interest and interest expense. Round your answers to the
nearest whole dollar, if required.
2020 June 30
Record interest expense
4. Calculate the annual interest expense for 2020. Round your answer to the nearest whole dollar, if required.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

On January 1,2018 always corporation issues 3200,000 5 year 12% bonds for $3,140,000. Interest is paid semi annually on January 1 and July 1. Always corporation used the straight line method of amortization. The company's fiscal year ends on December 31. The amount of discount amortized on July 1,2019 is -12,000 -60,000 -6,000 3,000
Carla Vista Corporation issued 2,800, 6%, 5-year, $1,000 bonds dated January 1, 2022, at 100. Interest is paid each January 1.(a)Prepare the journal entry to record the sale of these bonds on January 1, 2022. (b)Prepare the adjusting journal entry on December 31, 2022, to record interest expense
On January 1, 2025, Entity D issued $1,000,000 of 7%, 5-year bonds at 98. The bonds pay interest annually on December 31 and Entity D amortizes any premium or discount using the straight-line method. What is the annual interest expense on the bonds? $66,000. $74,000. $4,000. $70,000.
On January 1, 2021, Lizzy’s Lemonade issues 5%, 20-year bonds with a face amount of $100,000 for $88,443, priced to yield 6%. Interest is paid semiannually. What amount of interest expense will be recorded on June 30, 2021, the first interest payment date?
On January 1, 2019, Legion Company sold OMR 50,000 of 10% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for OMR 43,000, priced to yield 12%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2019, in the amount of: Select one: a. OMR 2,500 b. OMR 2,150 c. OMR 3,000 d. OMR 2,580
On January 1, 2019, Ellison Co. issued 3-year, 10%, $200,000 face value bonds. The bonds were issued at 95.0827 , the interest payable semiannually on July 1 and January 1. The bonds were sold to yield 12%. On July 1, 2020 The company retire 60% of the bonds at 102. a) Complete the following table: Cash Paid Carrying amount of Interest Discount Date Expense Amortization bonds January 1, 2019 July 1, 2019 January 1, 2020 July 1, 2020 January 1, 2021 July 1, 2021 January 1, 2022 b) Journalize the required entries on the following dates January 1, 2019 July 1, 2019 December 31, 2019 – adjusting entry January 1, 2020 July 1, 2020 The payment of interest July 1, 2020 the retirement of 60% of the bonds at 102 December 31, 2020 – adjusting entry
On January 1, 2021, Sheffield Corporation issued $6400000, 10-year, 9% bonds at 103. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2021 is A) Cash 6592000 Bonds Payable 6592000 B) Premium on Bonds Payable 192000 Cash 6400000 Bonds Payable 6592000 C) Cash 6592000 Bonds Payable 6400000 Premium on Bonds Payable 192000 D) Cash 6400000 Bonds Payable 6400000
Rose Corporation issued $360,000 of 6%, 10-year bonds on January 1, 2024, for $311,075. This price provided a vield of 8% on the bonds. Interest is payable semiannually on June 30 and December 31, If Rose uses the effective-interest method and assume fiscal year ends on October 31, what is the carrying value of bonds reported on the October 31, 2024 balance sheet? $312.062 O$313.125 $313.857 O $312.718
Yale Corporation issued to Zap Corporation $90,000, 8% (cash interest payable semiannually on June 30 and December 31) 10-year bonds dated and sold on January 1, 2020. Assume that the company uses the effective interest amortization method. If the bonds were sold to yield 9%, show how the bonds and related accounts would be presented on the balance sheet as of June 30, 2020.
(d) What will be the total interest payments over the five-year life of the bonds? Total interest expense? Total interest payments Total interest expense
Debt Issued at a Discount (Straight Line) On January 1, 2020, Drew Company issued $350,000, 5-year bonds for $320,000. The stated rate of interest was 7% and interest is paid annually on December 31. Required: Prepare the necessary journal entry on December 31, 2021, assuming the straight-line method is followed.
Carla Vista Corporation issued 2,800, 6%, 5-year, $1,000 bonds dated January 1, 2022, at 100. Interest is paid each January 1.(a)Prepare the journal entry to record the sale of these bonds on January 1, 2022. (b)Prepare the adjusting journal entry on December 31, 2022, to record interest expense (c)