Q2. Barney Inc. has a December 31 fiscal year. On February 1, year I. Barney Inc. issued bonds that pay interest on July 31 and January 31. The bonds were issued for $108000. The bonds have a face value of $87000. The bonds pay interest at an annual interest rate of 8%. The annual market rate on the bonds at the time they were issued was 4%. The current annual market rate on bonds is 8%. Calculate interest expense on the bonds for the year ended December 31. year1. Round your answer to the nearest dollar. (Please note that you do not require present value tables to answer this question so their omission is deliberate.)

Q2. Barney Inc. has a December 31 fiscal year. On February 1, year I. Barney Inc. issued bonds that pay interest on July 31 and January 31. The bonds were issued for $108000. The bonds have a face value of $87000. The bonds pay interest at an annual interest rate of 8%. The annual market rate on the bonds at the time they were issued was 4%. The current annual market rate on bonds is 8%. Calculate interest expense on the bonds for the year ended December 31. year1. Round your answer to the nearest dollar. (Please note that you do not require present value tables to answer this question so their omission is deliberate.)

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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On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $860 for $89,900. The bonds had a stated rate of 10% and paid interest semi-annually. What is the journal entry to record the issuance of the bonds? If an amount box does not require an entry, leave it blank. Jan. 1 - Select - - Select - - Select - - Select - - Select - - Select -
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1. On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the issuance of the bond is: Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000. Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177. Debit Bonds Payable $300,000; debit Interest Expense $12,177; credit Cash $312,177. Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000. Debit Cash $312,177; credit Bonds Payable $312,177.
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