Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $65,000,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $73,100,469. Interest on the bonds is payable semiannually on December 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 issuance of the bonds.2. Journalize the entries to record the following:a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the interest method. Round to the nearest dollar.b. The interest payment on June 30, Year 2, and the amortization of the bond premium,using the interest method. Round to the nearest dollar.3. Determine the total interest expense for Year 1.

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Asked Dec 20, 2019
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Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $65,000,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $73,100,469. 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. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the interest method. Round to the nearest dollar.
b. The interest payment on June 30, Year 2, and the amortization of the bond premium,using the interest method. Round to the nearest dollar.
3. Determine the total interest expense for Year 1.

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Expert Answer

Step 1

1.

Prepare journal entry for cash proceeds from the issuance of the bonds on July 1, Year 1.

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Post Account Title and Explanation Debit ($) Credit ($) Date Ref Year 1 Cash 73,100,469 8,100,469 July Premium on Bonds Payable Bonds Payable 65,000,000 (To record issue of bonds at premium) Working note: Calculate premium on bonds payable. Cash received Premium on bonds payable = -Face value = $73,100, 469– $65,000,000 = $8,100, 469

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Step 2

2a.

Prepare journal entry for first semiannual interest payment and amortization of discount on bonds

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Post Credit Account Title and Explanation Debit ($) Date Ref (S) Interest Expense December 31| Premium on Bonds Payable 3,655,023 Year 1 244,977 3,900,000 Cash record first semiannual payment of interest on bonds) (To Working notes: Calculate cash paid. Face valuex Stated interest rate Cash Paid(Interest Payment) = xInterest time peri od = $65, 000,000x12%x- 12 = $3,900, 000 Calculate interest expense. Interest expense = Carrying amount x Market interestx Time = $73,100, 469×10%x = S3,655,023 Calculate premium amortized. Premium amortized = Cash paid - Interest Expense = $3,900, 000 – $3,655,023 = $244,977

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Step 3

2b.

Prepare journal entry for second interest paymen...

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Post Credit Account Title and Explanation Debit ($) Date Ref (S) Interest Expense 3,642,775 Year 2 June 30 Premium on Bonds Payable 257,225 Cash 3,900,000 (To record second semianmual payment of interest on bonds) Working notes: Calculate interest expense. Interest expense = Carrying amount x Market interestx Time = (S73,100, 469– $244,977)×10%x. 12 = $3, 642, 775 Calculate premium amortized. Premium amortized = Cash paid – Interest Expense = $3,900, 000 – $3,642,775 = $257, 225

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