Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

When iuploading image then it get blurry Comment in comment section I will write data.

Correct answer please

In 2022, North Shore Community College had a total student body that was 5% more than in 2021, which was 5% more than in 2020. The enrollment in 2022 was 4,200. How many students attended the college in 2021? How many students attended the college in 2020?

Answer 2

Question

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Answer 6

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

Answer 7

Chapter 10, Problem 2AP

1.

To determine

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

Answer 8

1.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Prepare journal entry for issuance of bonds payable on January 1, 2017.

Date	Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017	Cash				3,456,448
January 1	Discount on Bonds Payable				543,552 (1)
		Bonds Payable				4,000,000
			(To record issuance of bonds payable at discount)

Table (1)

Working Note:

Calculate the amount of total bonds discount.

Par value of bonds = $4,000,000

Issue price of bonds = $3,456,448

$Total bonds discount = Par value of bonds−Cash received from issued of bonds=$4,000,000−$3,456,448=$543,552$ (1)

Description:

Cash is an asset and it is increased. So, debit it by $3,456,448.
Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $543,552.
Bonds payable is a liability and it is increased. So, credit it by $4,000,000.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

Answer 13

2.

To determine

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

Answer 14

2.

Expert Solution

Explanation of Solution

(a)

Calculate the amount of cash interest paid (semiannually).

Par value of bonds = $4,000,000

Interest rate = 6%

$Cash interest=(Par value×Interest rate×Interest time period)=$4,000,000×6100×12=$120,000$ (2)

Therefore, the amount of cash interest paid (semiannually) is $120,000.

(b)

Calculate amortization of bond discount per interest payment.

Total bonds discount = $543,552 (1)

Number of semiannual payments = 30 (15 years semiannual payments)

$Amortization of bond discount per interest payment = Total bonds discountNumber of semiannual =$543,552 (1)30=$18,118$ (3)

Therefore, the amortization of bond discount per interest payment is $18,118.

(c)

Calculate the interest expense on the bond.

Cash interest = $120,000 (2)

Bond discount per interest payment = $18,118 (3)

$Interest Expense=Cash Interest +Semiannual discounton bonds payable=$120,000+$18,118=$138,118$

Therefore, the amount of interest expense on the bond is $138,118.

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

Answer 19

3.

To determine

Calculate the total bond interest expense that will be recognized over the life of the bonds.

Answer 20

3.

Expert Solution

Explanation of Solution

Calculate the total bond interest expense.

Details	Amount ($)
Total interest payments for 15 years (30 Semiannual payments)	3,600,000 (4)
Add: Discounts	543,552 (1)
Total bond interest expense	4,143,552

Table (2)

Working Note:

Calculate the total interest payments for 15 years (semi-annually).

$Total interest payments for15 years (semi-annually)] = (Par value × Interest rate × 12) × 30= ($4,000,000 × 6% × 12) × 30= $120,000 ×30= $3,600,000$ (4)

Answer 21

3.

Expert Solution

Answer 22

3.

Expert Solution

Answer 23

Expert Solution

Answer 24

Conclusion

Therefore the total interest payment for 15 years (semi-annually) is $4,143,552.

Answer 25

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

Answer 26

4.

To determine

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Answer 27

4.

Expert Solution

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Date	Discount Unamortized ($)	Carrying Amount ($)
01/01/2017	543,552	3,456,448
30/06/2017	525,434	3,474,566
31/12/2017	507,316	3,492,684
30/06/2018	489,198	3,510,802
31/12/2018	471,080	3,528,920

Table (3)

Note: The amortization of bond discount per interest payment is $18,118 (3).

Answer 28

4.

Expert Solution

Answer 29

4.

Expert Solution

Answer 30

Expert Solution

Answer 31

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Answer 32

5.

To determine

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

Answer 33

5.

Expert Solution

Explanation of Solution

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (5)				138,118
June	30		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (4)

Working notes:

Calculate the interest expense on the bond as on June 30, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (5)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Prepare journal entry for payment of semiannual interest and amortization of discount on bonds.

Date		Account Title and Explanation			Post Ref	Debit ($)	Credit ($)
2017		Bond Interest Expense (6)				138,118
December	31		Discount on Bonds Payable (3)				18,118
			Cash (2)				120,000
				(To record semiannual payment of interest and amortization of discount on bonds)

Table (5)

Working notes:

Calculate the interest expense on the bond as on December 31, 2017.

$Interest Expense=Cash Interest +Discounton Bonds Payable=$120,000+$18,118=$138,118$ (6)

Interest expense is an expense and it decreases the equity value. So, debit it by $138,118.
Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $18,118.
Cash is an asset and it is decreased. So, credit it by $120,000

Answer 34

5.

Expert Solution

Answer 35

5.

Expert Solution

Answer 36

Expert Solution

Answer 37

Ch. 10 - Prob. 1MCQ Ch. 10 - Prob. 2MCQ Ch. 10 - Prob. 3MCQ Ch. 10 - Prob. 4MCQ Ch. 10 - Prob. 5MCQ Ch. 10 - Prob. 1DQ Ch. 10 - Prob. 2DQ Ch. 10 - Prob. 3DQ Ch. 10 - Prob. 4DQ Ch. 10 - Prob. 5DQ

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

Videos

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

Explanation of Solution

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense

Explanation of Solution

Calculate the total bond interest expense that will be recognized over the life of the bonds.

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Explanation of Solution

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

Videos

Prepare the journal entry to record issuance of bonds payable at discount on January 1, 2017.

Explanation of Solution

Compute for each semiannual period; (a) The cash payment (b) The straight-line discount amortization (c) The bond interest expense

Explanation of Solution

Calculate the total bond interest expense that will be recognized over the life of the bonds.

Explanation of Solution

Prepare an amortization table for the first two years of the bonds using straight-line method to amortize the discount.

Explanation of Solution

Prepare the journal entry to record semiannual interest and amortization of discount on bonds.

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

Compute for each semiannual period;

(a) The cash payment

(b) The straight-line discount amortization

(c) The bond interest expense