Bond premium, entries for bonds payable transactionsCampbell Inc. produces and sells outdoor equipment. On July 1, 20Y1, Campbellissued $30,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%,receiving cash of $31,951,110. Interest on the bonds is payable semiannually onDecember 31 and June 30. The fiscal year of the company is the calendar year.Instructions1. Journalize the entry to record the amount of cash proceeds from the issuanceof the bonds on July 1, 20Y1.2. Journalize the entries to record the following:a. The first semiannual interest payment on December 31, 20Y1, and theamortization of the bond premium, using the straight-line method. Roundto the nearest dollar.b. The interest payment on June 30, 20Y2, and the amortization of the bondpremium, using the straight-line method. Round to the nearest dollar.3. Determine the total interest expense for 20Y1.4. Will the bond proceeds always be greater than the face amount of the bondswhen the contract rate is greater than the market rate of interest?5. (Appendix 1) Compute the price of $31,951,110 received for the bonds by usingthe present value tables in Appendix A at the end of the text. Round to thenearest dollar.
Bond premium, entries for bonds payable transactions
Campbell Inc. produces and sells outdoor equipment. On July 1, 20Y1, Campbell
issued $30,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%,
receiving cash of $31,951,110. 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.
of the bonds on July 1, 20Y1.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on December 31, 20Y1, and the
amortization of the bond premium, using the straight-line method. Round
to the nearest dollar.
b. The interest payment on June 30, 20Y2, and the amortization of the bond
premium, using the straight-line method. Round to the nearest dollar.
3. Determine the total interest expense for 20Y1.
4. Will the bond proceeds always be greater than the face amount of the bonds
when the contract rate is greater than the market rate of interest?
5. (Appendix 1) Compute the price of $31,951,110 received for the bonds by using
the present value tables in Appendix A at the end of the text. Round to the
nearest dollar.
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