Q1: North Company issued $80 million of 12%, 10-year bonds on January 1. Interest is paya semiannually on June 30 and December 31. The bonds were sold to an underwriting group South Company issued $80 million of 11%, 10-year bonds on January 1. Interest is paya semiannually on June 30 and December 31. The bonds were sold to an underwriting group Prepare journal entries to record all transactions during the year for (a) The North Company bond issue. (b) The South Company bond issue. Assume that both companies amortize bond discount o straicht line mothed at ch intoroct ont dato

Q1: North Company issued $80 million of 12%, 10-year bonds on January 1. Interest is paya semiannually on June 30 and December 31. The bonds were sold to an underwriting group South Company issued $80 million of 11%, 10-year bonds on January 1. Interest is paya semiannually on June 30 and December 31. The bonds were sold to an underwriting group Prepare journal entries to record all transactions during the year for (a) The North Company bond issue. (b) The South Company bond issue. Assume that both companies amortize bond discount o straicht line mothed at ch intoroct ont dato

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 20Y1 July 1 Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 20Y1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y2 June 30 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Dec. 31 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y3 June 30 Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the…
Diaz Company issued bonds with a face value of $180,000 on January 1, Year 1. The bonds had a stated interest rate of 7 percent and a five-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 98. The straight- line method is used for amortization. Required a. Use a financial statements model to demonstrate how (1) the January 1, Year 1, bond issue and (2) the December 31, Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financial statements. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 2 e. Determine the amount of interest expense reported on the Year 2 income statement. Complete…
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2. On July1, 2018, Dixon Inc. issued bonds with a $500,000 face value at 96.0 and the 5-year bonds have a 10% interest rate in a market with a rate of 11%. Interest is payable annually and the effective-interest method is used for amortization. Prepare journal entries for the following transactions. Premium on Bonds Payable Interest Income Discount on Bonds Payable Interest Expense Cash Bonds Payable PLEASE NOTE: For each of the following journal entries there is one account's treatment (DR or CR), that depends on whether it is a bond issued at a premium or a discount. You are to identify if it is a DR or a CR. You must enter the account names exactly as written above and all dollar amounts will be rounded to whole dollars with "$" and commas as needed (i.e. $12,345). July 1, 2018: to record issuing the bonds DR DR/CR ? CR June 30, 2019: to record the amortization & payment of interest to bondholders: DR…
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7. Bower Company sold $100,000 of 20-year bonds for $95,000. The stated rate on the bonds was 7%, and interest is paid annually on December 31. What entry would be made on December 31 when the interest is paid? (Numbers are omitted.) a.Dr. Interest ExpenseCr. Bonds PayableCr. Cash b.Dr. Interest ExpenseCr. Cash c.Dr. Interest ExpenseCr. Discount on Bonds PayableCr. Cash d.Dr. Interest ExpenseDr. Discount on Bonds PayableCr. Cash