Presenting Bond Payable on Statement of Cash Flows Yale Corporation issued a 6%, $120,000 5-year bond dated January 1, with interest payable annually on December 31. The bond was sold to yield 8% interest. Assume that the company uses the effective interest method to amortize bond discounts or premiums. a. Provide journal entries to be made on January 1 and December 31 of this first year. • Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero). Date Jan. 1 Account Name Cash Bonds Payable Discount on Bonds Payable To record issuance of bond. Dec. 31 Interest Expense Discount on Bonds Payable Interest Payable To record payment of interest. Dr. Item Amortization of discount on bonds payable $ Proceeds from bond issuance $ 0 0 0 - 0 0 0 0 x 0 x Cr. 0x 0x 0x b. Indicate the impact of this transaction on the operating, investing, and financing sections of the current year statement of cash flows. The indirect method is used to report cash flows from operating activities. • Note: Indicate a subtraction in the cash flow statement with a negative sign in the Amount column. 0x 0 x 0x • Note: If an item is not included in the cash flow statement, enter zero (leave blank) in the Amount column, and enter "N/A" in the Cash Flow Section column. Amount Cash Flow Section x
Presenting Bond Payable on Statement of Cash Flows Yale Corporation issued a 6%, $120,000 5-year bond dated January 1, with interest payable annually on December 31. The bond was sold to yield 8% interest. Assume that the company uses the effective interest method to amortize bond discounts or premiums. a. Provide journal entries to be made on January 1 and December 31 of this first year. • Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero). Date Jan. 1 Account Name Cash Bonds Payable Discount on Bonds Payable To record issuance of bond. Dec. 31 Interest Expense Discount on Bonds Payable Interest Payable To record payment of interest. Dr. Item Amortization of discount on bonds payable $ Proceeds from bond issuance $ 0 0 0 - 0 0 0 0 x 0 x Cr. 0x 0x 0x b. Indicate the impact of this transaction on the operating, investing, and financing sections of the current year statement of cash flows. The indirect method is used to report cash flows from operating activities. • Note: Indicate a subtraction in the cash flow statement with a negative sign in the Amount column. 0x 0 x 0x • Note: If an item is not included in the cash flow statement, enter zero (leave blank) in the Amount column, and enter "N/A" in the Cash Flow Section column. Amount Cash Flow Section x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Practice not graded!
Transcribed Image Text:Presenting Bond Payable on Statement of Cash Flows
Yale Corporation issued a 6%, $120,000 5-year bond dated January 1, with interest payable annually on December 31. The bond was sold to yield 8% interest. Assume that the company uses the effective interest method to amortize bond discounts or
premiums.
a. Provide journal entries to be made on January 1 and December 31 of this first year.
• Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
Date
Jan. 1
Dec. 31
Account Name
Cash
Bonds Payable
Discount on Bonds Payable
To record issuance of bond.
Interest Expense
Discount on Bonds Payable
Interest Payable
To record payment of interest.
Dr.
0
0
0
0
0
0
0 x
0 x
Cr.
0 x
0 x
0x
0x
0 x
0x
b. Indicate the impact of this transaction on the operating, investing, and financing sections of the current year statement of cash flows. The indirect method is used to report cash flows from operating activities.
• Note: Indicate a subtraction in the cash flow statement with a negative sign in the Amount column.
• Note: If an item is not included in the cash flow statement, enter zero (leave blank) in the Amount column, and enter "N/A" in the Cash Flow Section column.
Amount
Cash Flow Section
Item
Amortization of discount on bonds payable $
Proceeds from bond issuance
$
→ X
X
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education