On January 1, 2018, Harvey Inc. issued $1,000,000 of 10 years, 6% bonds when the market 10%. The bonds pay semi-annual interest on July 1 and December 31. Required What is the entry to record the issuance of the bond on January 1, 2018? What is the entry to record the first interest payment on July 1, 2018? What is the carrving amount of the bond on January 1. 2022?

On January 1, 2018, Harvey Inc. issued $1,000,000 of 10 years, 6% bonds when the market 10%. The bonds pay semi-annual interest on July 1 and December 31. Required What is the entry to record the issuance of the bond on January 1, 2018? What is the entry to record the first interest payment on July 1, 2018? What is the carrving amount of the bond on January 1. 2022?

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.15MCE

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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.
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