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ISBN: 9780077632878
Author: Wild
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Chapter 14, Problem 1E
Requirement-1:
To determine
To calculate:
The amount of interest on bonds to be paid every six months
Requirement-1:
Expert Solution
Answer to Problem 1E
Solution:
The amount of interest on bonds to be paid every six months is $153,000
Explanation of Solution
Explanation:
The amount of interest on bonds to be paid every six months is calculated as follows:
Bonds Par Value is $3,400,000
Annual interest rate on bonds is 9%
Semiannual interest rate on bonds shall be 9%/2 = 4.5%
Hence, the amount of interest on bonds to be paid every six months = 3,400,000*4.5% = $153,000
Conclusion
Conclusion:
The amount of interest on bonds to be paid every six months is $153,000
Requirement-2:
To determine
To prepare :
The journal entries for issuance and interest payment of bonds
Requirement-2:
Expert Solution
Answer to Problem 1E
Solution:
The journal entries for issuance and interest payment of bonds are as follows:
| (a) | |||
| Date | Account titles | Debit | Credit |
| Jan. 1, 2015 | Cash | $ 3,400,000 | |
| Bonds payable | $3,400,000 | ||
| (b) Journal entry for the first interest payment | |||
| Date | Account titles | Debit | Credit |
| Jun. 30, 2015 | Interest Expense | $ 153,000 | |
| Cash | $ 153,000 | ||
| (b) Journal entry for the Second interest payment | |||
| Date | Account titles | Debit | Credit |
| Dec. 31, 2015 | Interest Expense | $ 153,000 | |
| Cash | $ 153,000 | ||
Explanation of Solution
Explanation:
The journal entries for issuance and interest payment of bonds are explained as follows:
| (a) Journal entry for issuance of bonds: | |||
| Date | Account titles | Debit | Credit |
| Jan. 1, 2015 | Cash | $ 3,400,000 | |
| Bonds payable | $3,400,000 | ||
| (Being bonds issued at par for cash) | |||
| (b) Journal entry for the first interest payment | |||
| Date | Account titles | Debit | Credit |
| Jun. 30, 2015 | Interest Expense (3400000*9%/2) | $ 153,000 | |
| Cash | $ 153,000 | ||
| (Being interest on bonds paid) | |||
| (b) Journal entry for the Second interest payment | |||
| Date | Account titles | Debit | Credit |
| Dec. 31, 2015 | Interest Expense (3400000*9%/2) | $ 153,000 | |
| Cash | $ 153,000 | ||
| (Being interest on bonds paid) | |||
Conclusion
Conclusion:
The amount of interest on bonds to be paid every six months is $153,000
Requirement-3:
To determine
To prepare :
The journal entries for issuance of bonds at a price 98 and 102
Requirement-3:
Expert Solution
Answer to Problem 1E
Solution:
The journal entries for issuance of bonds are as follows:
| (a) Journal entry for issuance of bonds at 98: | |||
| Date | Account titles | Debit | Credit |
| Jan. 1, 2015 | Cash | $ 3,332,000 | |
| Discount on bonds payable | $ 68,000 | ||
| Bonds payable | $ 3,400,000 | ||
| (b) Journal entry for issuance of bonds at 102: | |||
| Date | Account titles | Debit | Credit |
| Jan. 1, 2015 | Cash | $ 3,468,000 | |
| Premium on bonds payable | $ 68,000 | ||
| Bonds payable | $ 3,400,000 | ||
Explanation of Solution
Explanation:
The journal entries for issuance of bonds are explained as follows:
| (a) Journal entry for issuance of bonds at 98: | |||
| Date | Account titles | Debit | Credit |
| Jan. 1, 2015 | Cash (3400000*98/100) | $ 3,332,000 | |
| Discount on bonds payable (3400000-3332000) | $ 68,000 | ||
| Bonds payable | $ 3,400,000 | ||
| (Being bonds issued at discount for cash) | |||
| (b) Journal entry for issuance of bonds at 102: | |||
| Date | Account titles | Debit | Credit |
| Jan. 1, 2015 | Cash (3400000*102/100) | $ 3,468,000 | |
| Premium on bonds payable (3468000-3400000) | $ 68,000 | ||
| Bonds payable | $ 3,400,000 | ||
| (Being bonds issued at premium for cash) | |||
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Chapter 14 Solutions
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