Superior Drive ins Ltd borrowed money by issuing $5,500,000 of 6% bonds payable at 93.5 on July 1,2018. The bonds are 10 year bonds and pay interest each January 1 and July 1. Superior received $5,142,5000 when the bonds payable were issued. Journalizing- July 1 Cash. 5142500 (debit) Discounts on bonds payable 357,500 (debit) Bonds payable. 5,500,000(credit) HOW MUCH MUST SUPERIOR PAY BACK AT MATURITY? WHEN IS THE MATURITY DATE?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Superior Drive ins Ltd borrowed money by issuing $5,500,000 of 6% bonds payable at 93.5 on July 1,2018. The bonds are 10 year bonds and pay interest each January 1 and July 1. Superior received $5,142,5000 when the bonds payable were issued. Journalizing- July 1 Cash. 5142500 (debit) Discounts on bonds payable 357,500 (debit) Bonds payable. 5,500,000(credit) HOW MUCH MUST SUPERIOR PAY BACK AT MATURITY? WHEN IS THE MATURITY DATE?
### Bond Issuance and Interest Expense Analysis

#### 1. Cash Received from Bonds Payable
- **Objective**: Determine the amount of cash received by Superior when it issued the bonds payable.
- **Task**: Journalize this transaction to accurately reflect it in Superior's financial records.

#### 2. Total Repayment at Maturity
- **Objective**: Calculate the total amount Superior must pay back at the maturity of the bonds.
- **Details**: Identify the maturity date of these bonds to ensure preparedness for repayment.

#### 3. Cash Interest Payments
- **Objective**: Determine the amount of cash interest Superior is obligated to pay every six months.
- **Task**: Establish a schedule and process for making timely and accurate interest payments.

#### 4. Interest Expense Reporting
- **Objective**: Assess the interest expense Superior will report biannually.
- **Methodology**: Employ the straight-line amortization method to systematically allocate the interest expense.
- **Task**: Journalize entries related to:
  - Accrual of interest and amortization of discount as of December 31, 2018.
  - Payment of interest on January 1, 2019.

This overview prepares students or professionals to understand the financial implications of bond issuance, interest payments, and the proper journalization of these transactions.
Transcribed Image Text:### Bond Issuance and Interest Expense Analysis #### 1. Cash Received from Bonds Payable - **Objective**: Determine the amount of cash received by Superior when it issued the bonds payable. - **Task**: Journalize this transaction to accurately reflect it in Superior's financial records. #### 2. Total Repayment at Maturity - **Objective**: Calculate the total amount Superior must pay back at the maturity of the bonds. - **Details**: Identify the maturity date of these bonds to ensure preparedness for repayment. #### 3. Cash Interest Payments - **Objective**: Determine the amount of cash interest Superior is obligated to pay every six months. - **Task**: Establish a schedule and process for making timely and accurate interest payments. #### 4. Interest Expense Reporting - **Objective**: Assess the interest expense Superior will report biannually. - **Methodology**: Employ the straight-line amortization method to systematically allocate the interest expense. - **Task**: Journalize entries related to: - Accrual of interest and amortization of discount as of December 31, 2018. - Payment of interest on January 1, 2019. This overview prepares students or professionals to understand the financial implications of bond issuance, interest payments, and the proper journalization of these transactions.
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