Question 2 A Massy Company issued $4,000,000 of 10-year, 11% bonds on January 4, 2021. The bonds pay interest semiannually on June 30 and December 31. The current market rate of interest is 10%.   Required: (i)                Calculate the selling price of the bond. (ii)               Prepare the journal entries for the issuance of the bonds. (iii)              Prepare the journal entries for the amortization on the Premium/Discount on the bonds.

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 96PSB
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FINANCIAL CALCULATORS TO TWO DECIMAL PLACES

 

Question 2 A

Massy Company issued $4,000,000 of 10-year, 11% bonds on January 4, 2021. The bonds pay interest semiannually on June 30 and December 31. The current market rate of interest is 10%.

 

Required:

(i)                Calculate the selling price of the bond.

(ii)               Prepare the journal entries for the issuance of the bonds.

(iii)              Prepare the journal entries for the amortization on the Premium/Discount on the bonds.

(iv)              Prepare the journals for interest payment on the amortization of the premium or discount.

(v)               Prepare the journal entries if the bonds are redeemed at maturity.

 

(i)                  

PMT

Answer

N

Answer

I/Y

Answer

FV

Answer

PV

Answer

 

 

Selling price of bond

Answer

                                          

 

(ii)

This bond is selling at a

Answer

 

 

The premium/discount on this bond is

Answer

 

 

Journal Entry for Issuance of Bonds:

Answer

 

Answer

 

 

Bonds Payable

 

Answer

 

Answer

 

Answer

 

  

(iii)            Journal Entry for Amortization of Premium/Discount

 

Answer

 

Answer

 

 

Answer

 

Answer

 

 

(iv)             Journal Entry for interest payment:

 

Answer

 

Answer

 

Answer

 

Answer

  

 

Cash

 

Answer

 

 

(v)               Journal entries of Bonds redeemed at maturity

 

Answer

 

Answer

 

 

Answer

 

Answer

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