On Dec. 31, 2024, bonds with a total face value of $100,000 and an annual stated coupon rate of 8% are sold for $95,026.30. The bonds mature in 3 years and the annual effective market rate is 10%. Interest is payable annually on Dec. 31. (A) Prepare the journal entry to record the issuance of the bonds on Dec. 31, 2024. (B) Prepare the journal entry (or entries) to record the first interest payment on Dec. 31, 2025 and the amortization of premium/discount using: (1) the straight-line method, and (2) the effective interest-rate method. (C) Prepare the journal entry to record the early retirement on June 30, 2026 of $40,000 face value (40%) of the bonds at a cash price of 101. Cash was paid to retire the bonds and the straight-line method of amortization was being used for premiums/discounts. You do not need to prepare the entries to bring interest and amortization up-to-date, but you can assume these entries were already recorded.
On Dec. 31, 2024, bonds with a total face value of $100,000 and an annual stated coupon rate of 8% are sold for $95,026.30. The bonds mature in 3 years and the annual effective market rate is 10%. Interest is payable annually on Dec. 31. (A) Prepare the journal entry to record the issuance of the bonds on Dec. 31, 2024. (B) Prepare the journal entry (or entries) to record the first interest payment on Dec. 31, 2025 and the amortization of premium/discount using: (1) the straight-line method, and (2) the effective interest-rate method. (C) Prepare the journal entry to record the early retirement on June 30, 2026 of $40,000 face value (40%) of the bonds at a cash price of 101. Cash was paid to retire the bonds and the straight-line method of amortization was being used for premiums/discounts. You do not need to prepare the entries to bring interest and amortization up-to-date, but you can assume these entries were already recorded.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:On Dec. 31, 2024, bonds with a total face value of $100,000 and an annual stated coupon rate of 8% are sold for $95,026.30. The
bonds mature in 3 years and the annual effective market rate is 10%. Interest is payable annually on Dec. 31.
(A) Prepare the journal entry to record the issuance of the bonds on Dec. 31, 2024.
(B) Prepare the journal entry (or entries) to record the first interest payment on Dec. 31, 2025 and the amortization of
premium/discount using:
(1) the straight-line method, and
(2) the effective interest-rate method.
(C) Prepare the journal entry to record the early retirement on June 30, 2026 of $40,000 face value (40%) of the bonds at a cash
price of 101. Cash was paid to retire the bonds and the straight-line method of amortization was being used for
premiums/discounts. You do not need to prepare the entries to bring interest and amortization up-to-date, but you can assume
these entries were already recorded.
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