Chapter 14, Problem S14B.16SE

To determine

Bonds:

• Bonds are long term negotiable instruments of debt issued by corporate entities to secure funds from the public.

• These funds are used to either fund long term capital expenditure or similar long term investment opportunities.

• Bonds represent steady income for the investor in the form of periodic interest payments by the entity issuing the bond.

• Bonds are issued at par (at face value), at premium (at higher than face value) or at a discount (at lower than face value).

• Interest expense for the bonds is calculated on the face value of the bonds payable. The frequency of the interest payments is pre-determined and can be annual, semi-annual, quarterly etc.

• Discount on issue of bonds is amortized in the same frequency of the interest payments i.e. Semi Annual , Annual Payments.

Amortization table using effective interest amortization method for the first two semiannual interest periods

To determine

2)

Journal Entries

Journal entries are the first step in recording financial transactions and preparation of financial statements. These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

Assets and expenses have debit balances and Liabilities and Incomes have credit balances.

Correct journal Entry for the issuance of Bonds and payment of interest.