Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 12, Problem 12.34AP
Analyzing and journalizing bond transactions
On January 1, 2016, Agricultural Credit Union (ACU) issued 7%, 20-year bonds payable with Face value of $600,000. These bonds pay interest on June 30 and December 31. The issue price of the bonds is 104. Journalize the following bond transactions:
a. Issuance of the bonds on January 1, 2016.
b. Payment of interest and amortization on June 30, 2016.
c. Payment of interest and amortization on December 31, 2016.
d. Retirement of the bond at maturity on December 31, 2035.
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Analyzing and journalizing bond transactions
On January 1, 2018, Educators Credit Union (ECU) issued 8%, 20-vear bonds payable with face value of $1,000,000. These bonds pay interest on June 30 and December 31. The issue price of the bonds is 109.
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Analyzing and Reporting Financial Statement Effects of Bond Transactions
On January 1, 2016, Trueman Corp. issued $350,000 of 20-year, 11% bonds for $323,669, yielding a market (yield) rate of 12%. Interest is payable semiannually on June
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Required
a. Confirm the bond issue price.
b. Prepare journal entries to record the bond issuance, semiannual interest payment and discount amortization on June 30, 2016, and semiannual interest payment
and discount amortization on December 31, 2016. Use the effective interest rate method.
c. Post the journal entries from part b to their respective T-accounts.
d. Trueman elected to report these bonds in its financial statements at fair value. On December 31, 2016, these bonds were listed in the bond market at a price of 101
(or 101% of par value). What entry is required to adjust the reported value of these bonds to fair value?
e. Prepare a table summarizing the effect of these bonds on earnings for 2016.
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Reporting Financial Statements Effects on Bond TransactionsOn January 1, 2016, McKeown Inc. Issued $250,000 of 8%, 9 -year bonds for $220,776, yielding a market (yield) rate of 10%. Semiannual interest is payable on June 30 and December 31 of each year. a. Show computations to confirm the bond issue price.b. Prepare journal entries to record the bond issuance, semiannual interest payment and discount amortization on June 30, 2016 and semiannual interest payment on December 31, 2016. Use the effect change rate. c. Post the journal entries from part b to their respective T accounts.d. Record each of the transactions from part b in the financial statement effect template.
Chapter 12 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
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