amortizatlon LO P3 Wookie Company issues 9%, five-year bonds, on January 1 of this year, with a par value of $109,000 and semiannual interest payments. Semiannual Period-End January 1, issuance June 30, first payment December 31, second payment Unamortized Premium $8, 291 7,462 6,633 Carrying Value $117, 291 () (1) (2) 116,462 115,633 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on January 1. (b) The first interest payment on June 30. (c) The second interest payment on December 31. View transacfion list Journal entry worksheet 3 Record the issuance of the bonds on January 1. Note: Enter debits before credits. Date General Journal Debit Credit January 01

amortizatlon LO P3 Wookie Company issues 9%, five-year bonds, on January 1 of this year, with a par value of $109,000 and semiannual interest payments. Semiannual Period-End January 1, issuance June 30, first payment December 31, second payment Unamortized Premium $8, 291 7,462 6,633 Carrying Value $117, 291 () (1) (2) 116,462 115,633 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on January 1. (b) The first interest payment on June 30. (c) The second interest payment on December 31. View transacfion list Journal entry worksheet 3 Record the issuance of the bonds on January 1. Note: Enter debits before credits. Date General Journal Debit Credit January 01

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter11: Liabilities: Bonds Payable

Section: Chapter Questions

Problem 11.3BPR

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Issuing bonds at face amount On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a 5,000,000, 6%, 10-year bond that pays semiannual interest of 150,000 (5,000,000 6% year), receiving cash of 5,000,000. Journalize the entries to record (A) the issuance of the bonds. (B) the first interest payment on June 30, and (C) the payment of the principal on the maturity date.
MASTERY PROBLEM Jackson, Inc.s fiscal year ends December 31. Selected transactions for the period 20-1 through 20-8 involving bonds payable issued by Jackson are as follows: 20-1 Oct. 31 Issued 600,000 of 10-year, 7%, callable bonds dated October 31, 20-1, for 612,000. Interest is payable semiannually on October 31 and April 30. The bond indenture provides that Jackson is to pay to the trustee bank 20,000 by May 15 of each year (except the tenth year) as a sinking fund for the retirement of the bonds on call or at maturity. Dec. 31 Made the adjusting entry for interest payable and amortized two months premium on the bonds (straight-line method). 20-2 Jan. 2 Reversed the adjusting entry for interest payable and bond premium amortization. Apr. 30 Paid the semiannual interest on the bonds and amortized six months premium. May 15 Paid the sinking fund trustee 20,000. Oct. 31 Paid the semiannual interest on the bonds and amortized six months premium. Dec. 31 Made the adjusting entry for interest payable and amortized two months premium on the bonds. 31 Sinking fund earnings for the year were 900. 20-8 May 15 Paid the sinking fund trustee 20,000. Oct. 31 Paid the semiannual interest on the bonds and amortized six months premium. 31 Redeemed the bonds, which were called at 97. The balance in the bond premium account is 3,600 after the payment of interest and amortization of premium have been entered. The cash balance in the sinking fund is 200,000, which is applied to the redemption. Jackson paid the sinking fund trustee the additional cash needed to pay off the bonds. (Hint: First make the entry for payment to the sinking fund, then make the entry for redemption of the bonds.) REQUIRED 1. Enter the preceding transactions in general journal form. 2. Calculate the carrying value of the bonds as of December 31, 20-2.
Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Bond discount, entries for bonds payable transactions On July 1, Year 1, Danzer Industries Inc. issued 40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of 37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. (Appendix 1) Compute the price of 37,282,062 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)