Yale Corporation issued a 6%, $72,000 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 To record issuance of bond. To record payment of interest. Dr. Cr. 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. Item Amortization of discount on bonds payable S Amount Cash Flow Section Proceeds from bond issuance S :
Yale Corporation issued a 6%, $72,000 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 To record issuance of bond. To record payment of interest. Dr. Cr. 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. Item Amortization of discount on bonds payable S Amount Cash Flow Section Proceeds from bond issuance S :
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Presenting Bond Payable on Statement of Cash Flows
Yale Corporation issued a 6%, $72,000 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
To record issuance of bond,
To record payment of interest.
Dr.
Cr.
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.
Amount
• 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.
Cash Flow Section
Item
Amortization of discount on bonds payable St
Proceeds from bond issuance
S
÷
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