FINANCIAL ACCT-CONNECT
8th Edition
ISBN: 9781266627903
Author: Wild
Publisher: INTER MCG
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On January 1, 2018, Technicians Credit Union (TCU) issued 5%, 20-year bonds payable with face value of $100,000. These bonds pay interest on June 30 and December 31. The issue price of the bonds is 106. Journalize the following bond transactions:
a (Click the icon to view the bond transactions.)
(Assume bonds payable are amortized using the straight-line amortization method. Record debits first, then credits. Select explanations on the last line of the journal entry. Round your answers to the nearest whole dollar.)
- X
a.
More Info
a. Issuance of the bonds on January 1, 2018.
b. Payment of interest and amortization on June 30, 2018.
c. Payment of interest and amortization on December 31, 2018.
d. Retirement of the bond at maturity on December 31, 2037, assuming the last
interest payment has already been recorded.
Print
Done
The following situations are independent of each other.
Instructions
For situation (a) and situation (b), prepare the entry to "redeem" the bonds.
a) MCo. redeemed $140,000 face value, 9% bonds on April 30, 2022, at 101. The
carrying value of the bonds at the redemption date was $126,500. The bonds
pay annual interest, and the interest payment due on April 30, 2022, has been
made and recorded.
To create the journal entry:
(1) Bonds are "redeemed" at face value (DR "Bonds R").
(2) calculate CASH paid out to redeem bonds (a $1,000 bond redeemed at 102 means cash
paid out (a CR) of $1,020).
(3) calculate "premium" or "discount" on bonds payable by (face value - carrying value). If
carrying value LESS THAN face value = a "discount" (CR "discount on..."). If carrying value
GREATER THAN face value = a "premium" (DR "premium on...").
(4) Calculate gain or loss on redemption by plugging in DR $ ("loss...") or CR $ ("gain...") so
that total $ DR = total $ CR.
Situation (a) journal entry (Read…
3. Prepare the journal entries to record the issuance of the bonds by Sanyal and Barnwell’s investment on February 1, 2024.
4. Prepare the journal entries by both firms to record all events related to the bonds through January 31, 2026.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Chapter 10 Solutions
FINANCIAL ACCT-CONNECT
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