FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Bond Premium; Bonds payable Transactions

Beaufort Vaults Corporation produces and sells burial vaults. On July 1, 20Y3, Beaufort Vaults Corporation issued $25,000,000 of 10-year, 8% bonds at par. 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.  Illustrate the effects of the issuance of the bonds on July 1, 20Y3, on the accounts and financial statements. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

 
Statement of Cash Flows Balance Sheet
Assets = Liabilities + Stockholders' Equity
Cash  = Bonds payable  +   No effect 
July 1. fill in the blank 4   fill in the blank 5     fill in the blank 6
Statement of Cash Flows   Income Statement
Financing  fill in the blank 8   No effect  fill in the blank 10

2.  Illustrate the effects of the first semiannual interest payment on December 31, 20Y3, on the accounts and financial statements. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

 
Statement of Cash Flows Balance Sheet
Assets = Liabilities + Stockholders' Equity
  =   +    
Dec. 31. fill in the blank 14   fill in the blank 15     fill in the blank 16
Statement of Cash Flows   Income Statement
  fill in the blank 18     fill in the blank 20

3.  Illustrate the effects of the payment of the face value of bonds at maturity on the accounts and financial statements. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

 
Statement of Cash Flows Balance Sheet
Assets = Liabilities + Stockholders' Equity
  =   +    
June 30. fill in the blank 24   fill in the blank 25     fill in the blank 26
Statement of Cash Flows   Income Statement
  fill in the blank 28     fill in the blank 30

4.  The selling price of the bonds  less face amount of the bonds  is called a premium on Bonds payable; the amortization of a discount increases  Interest expense, and the amortization of a premium decreases  Interest expense.

 
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