On January 1, 2020, Everly Bottle Company sold $3,000,000 in long-term bonds. The bonds will mature in 5 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest July 1 and January 1 of each year. The bonds are to be accounted for under the effective-interest method. Instructions: 1. Calculate the bond proceeds using the attached present value tables. 2. Prepare a Bond Discount/Premium Amortization Schedule. 3. Prepare the journal entry to record the bonds on the date of issue, January 1, 2020.
On January 1, 2020, Everly Bottle Company sold $3,000,000 in long-term bonds. The bonds will mature in 5 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest July 1 and January 1 of each year. The bonds are to be accounted for under the effective-interest method. Instructions: 1. Calculate the bond proceeds using the attached present value tables. 2. Prepare a Bond Discount/Premium Amortization Schedule. 3. Prepare the journal entry to record the bonds on the date of issue, January 1, 2020.
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...
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![On January 1, 2020, Everly Bottle Company sold
$3,000,000 in long-term bonds. The bonds will mature in 5 years and have a
stated interest rate of 8% and a yield rate of 10%. The bonds pay interest
July 1 and January 1 of each year. The bonds are to be accounted for under
the effective-interest method.
Instructions:
1. Calculate the bond proceeds using the attached present value tables.
2. Prepare a Bond Discount/Premium Amortization Schedule.
3. Prepare the journal entry to record the bonds on the date of issue,
January 1, 2020.
4. Prepare the journal entry to record the first payment and amortization of
the discount/premium on July 1, 2020.
5. Prepare the journal entry to record the accrued interest and
amortization of the discount/premium on December 31, 2020.
6. Prepare the journal entry to record the payment of the bonds at
maturity; January 1, 2025. Assume the appropriate accrual was made on
December 31, 2024 (see 5. above)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5acefc11-07be-4125-8c9b-06b4c580ecc9%2Fd8b62acb-a126-4e3d-b2d8-10c034b7cb48%2Fjuedm3j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 1, 2020, Everly Bottle Company sold
$3,000,000 in long-term bonds. The bonds will mature in 5 years and have a
stated interest rate of 8% and a yield rate of 10%. The bonds pay interest
July 1 and January 1 of each year. The bonds are to be accounted for under
the effective-interest method.
Instructions:
1. Calculate the bond proceeds using the attached present value tables.
2. Prepare a Bond Discount/Premium Amortization Schedule.
3. Prepare the journal entry to record the bonds on the date of issue,
January 1, 2020.
4. Prepare the journal entry to record the first payment and amortization of
the discount/premium on July 1, 2020.
5. Prepare the journal entry to record the accrued interest and
amortization of the discount/premium on December 31, 2020.
6. Prepare the journal entry to record the payment of the bonds at
maturity; January 1, 2025. Assume the appropriate accrual was made on
December 31, 2024 (see 5. above)
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