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1.
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.
Stated interest rate: It refers to the interest rate that is stated on the face of the bonds.
Market interest rate: It refers to the interest rate that the lenders expect, or demands from the borrower to part with their money as loan to them.
Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.
Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.
To identify: The issue price of bonds.
2.
a.
To prepare:
b.
To prepare: Journal entry to record cash received from the bond issue.
c.
To prepare: Journal entry to record semiannual interest and amortization of discount on bonds using straight-line amortization method.
d.
To prepare: Journal entry to record the payment on the mortgage payable for 2020.
3.
To calculate: Total interest expense incurred in 2020.
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Chapter 12 Solutions
Horngren's Financial & Managerial Accounting, Student Value Edition (6th Edition)
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