4 On February 1, 2021, Kailua Corp.issued $800,000, 20 year, 9% bonds,with interest payable semi-annually onJuly 31 and January 31. At this time themarket rate of interest was 10%.Kailua's year end is December 31, andthey use the effective interest methodof amortizing bond premium ordiscount. REQUIRED: SHOW ALLCALCULATIONS. ROUND ALL DOLLARAMOUNTS TO THE NEARESTDOLLAR. ALL JOURNAL ENTRIESMUST BE IN GOOD FORM. 1.Calculate the selling price of thebonds. 2. Record the issuance of thebonds. 3. Record the first interestpayment on July 31, 2021. 4. Recordthe adjusting entry required for thisbond on December 31, 2021. 5.Prepare the Balance Sheetpresentation for this bond atDecember 31, 2021. 6. Record thesecond interest payment on January31, 2022. (Hint, at this point, calculatethe balance in the Discount on BondsPayable account) 7. After the interestpayment was made on Jan 31, 2022,on the same day, Kailua purchasedand retired 50% of this bond issue at94.8. Record this transaction. KEYFIGURES: Jan 31, 2022 InterestExpense $ 6,099 Loss on Retirement ofBonds $12,936

Effective Interest Rate Method: Using this approach, the interest rate is maintained as the bond's…

On February 1, 2021, Kailua Corp. issued $800,000, 20 year, 9% bonds, with interest payable semi-annually on July 31 and January 31. At this time the market rate of interest was 10%. Kailua's year end is December 31, and they use the effective interest method of amortizing bond premium or discount. REQUIRED: SHOW ALL CALCULATIONS. ROUND ALL DOLLAR AMOUNTS TO THE NEAREST DOLLAR. ALL JOURNAL ENTRIES MUST BE IN GOOD FORM. 1. Calculate the selling price of the bonds. 2. Record the issuance of the bonds. 3. Record the first interest payment on July 31, 2021. 4. Record

On February 1, 2021, Kailua Corp. issued $800,000, 20 year, 9% bonds, with interest payable semi-annually on July 31 and January 31. At this time the market rate of interest was 10%. Kailua's year end is December 31, and they use the effective interest method of amortizing bond premium or discount. REQUIRED: SHOW ALL CALCULATIONS. ROUND ALL DOLLAR AMOUNTS TO THE NEAREST DOLLAR. ALL JOURNAL ENTRIES MUST BE IN GOOD FORM. 1. Calculate the selling price of the bonds. 2. Record the issuance of the bonds. 3. Record the first interest payment on July 31, 2021. 4. Record

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...

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On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
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
Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received $540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
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.