Mara Company reported the following accounts on December 31, 2021: 50,000 180,000 Premium on bonds payable Accrued interest on bonds payable Bonds payable, due January 1, 2026, interest at 12% payable semiannually on January 1 and July 1 3,000,000 On December 31, 2021, cash of P3,900,000 was made available from the issue of 10-year 10% bonds payable with face amount of P4,000,000. The cash received from the new issue was used for retirement of the 12% bonds payable at a call price of 102 plus accrued interest. Required: Prepare journal entries to record the bond refunding.

Mara Company reported the following accounts on December 31, 2021: 50,000 180,000 Premium on bonds payable Accrued interest on bonds payable Bonds payable, due January 1, 2026, interest at 12% payable semiannually on January 1 and July 1 3,000,000 On December 31, 2021, cash of P3,900,000 was made available from the issue of 10-year 10% bonds payable with face amount of P4,000,000. The cash received from the new issue was used for retirement of the 12% bonds payable at a call price of 102 plus accrued interest. Required: Prepare journal entries to record the bond refunding.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

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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.
Naval Inc. issued $200,000 face value bonds at a discount and received $190,000. At the end of 2018, the balance in the Discount on Bonds Payable account is $5,000. This years balance sheet will show a net liability of ________. A. $200,000 B. $180,000 C. $195,000 D. $205,000
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any 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. Assume the company retires the bonds on June 30, 2020, at 103 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
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