Synergy Corporation is authorized to issue $1,200,000 of 8% bonds. Interest on the bonds is payable semiannually; the bonds are dated January 1, 2019, and are due December 31, 2023. Required: Prepare the journal entries to record the following: a. January 1, 2019 Sold the bonds at par b. June 30, 2019 First interest payment c. December 31, 2019 Second interest payment

Synergy Corporation is authorized to issue $1,200,000 of 8% bonds. Interest on the bonds is payable semiannually; the bonds are dated January 1, 2019, and are due December 31, 2023. Required: Prepare the journal entries to record the following: a. January 1, 2019 Sold the bonds at par b. June 30, 2019 First interest payment c. December 31, 2019 Second interest payment

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 96PSA

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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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