menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

Bond premium, entries for bonds payable transactions, interest method of amortizing bond premium Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers 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 .

BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

Solutions

Chapter
Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 11, Problem 11.5BPR
Textbook Problem
1 views

Bond premium, entries for bonds payable transactions, interest method of amortizing bond premium

Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers 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.

1.

To determine

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Premium on bonds payable: It occurs when the bonds are issued at a high price than the face value.

Effective-interest amortization method: Effective-interest amortization methodit is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

To prepare: Journal entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.

Explanation of Solution

  • Cash is an asset and it is increased. So, debit it by $73,100,469.
  • Premium on Bonds Payable is an adjunct liability account and it is increased. So, credit it by $8,100,469.
  • Bonds payable is a liability and it is increased. So, credit it by $65,000,000.

Working note:

Calculate premium on bonds payable.

Premium on bonds payable = (Cash received 

2.

A.

To determine

To prepare: Journal entry to record first semiannual interest payment and amortization of bond premium on December 31, Year 1.

B.

To determine

To prepare: Journal entry to record second interest payment and amortization of bond discount on June 30, Year 2.

3.

To determine

The amount of total interest expense for Year 1.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 11 Solutions

Corporate Financial Accounting
Show all chapter solutions
add
Ch. 11 - Issuing bonds at a discount On the first day of...Ch. 11 - Discount amortization Using the bond from Basic...Ch. 11 - Issuing bonds at a premium On the first day of the...Ch. 11 - Premium amortization Using the bond from Basic...Ch. 11 - Redemption of bonds payable A 500,000 bond issue...Ch. 11 - Bond price United States Steel Corporations 7.5%...Ch. 11 - Entries for issuing bonds Thomson Co. produces and...Ch. 11 - Entries for issuing bonds and amortizing discount...Ch. 11 - Entries for issuing bonds and amortizing premium...Ch. 11 - Entries for issuing and calling bonds; loss Hoover...Ch. 11 - Entries for issuing and calling bonds; gain Mia...Ch. 11 - Reporting bonds At the beginning of the current...Ch. 11 - Present value of amounts due Assume that you are...Ch. 11 - Present value of an annuity Determine the present...Ch. 11 - Present value of an annuity On January 1 you win...Ch. 11 - Present value of an annuity Assume the same data...Ch. 11 - Present value of bonds payable; discount Pinder...Ch. 11 - Present value of bonds payable; premium Moss Co....Ch. 11 - Amortize discount by interest method On the first...Ch. 11 - Amortize premium by interest method Shunda...Ch. 11 - Compute bond proceeds, amortizing premium by...Ch. 11 - Compute bond proceeds, amortizing discount by...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Bond premium, entries for bonds payable...Ch. 11 - Continuing Company AnalysisAmazon: Times interest...Ch. 11 - Arch Coal:Times interest earned Arch Coal, Inc. is...Ch. 11 - Aeropostale: Times interest earned Aeropostale,...Ch. 11 - Hilton and Marriott: Times interest earned Hilton...Ch. 11 - Ethics in Action CLG Capital Inc. is a large...Ch. 11 - Communication Nordbock Inc. reports the following...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
Explain and provide examples of deferrals, accruals, and estimates.

Intermediate Accounting: Reporting And Analysis

What are economic events?

Accounting Information Systems

What are the advantages of financing through the sale of stock?

Foundations of Business (MindTap Course List)

REPLACEMENT ANALYSIS The Chang Company is considering the purchase of a new machine to replace an obsolete one....

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What is a trademark?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Give three examples of important trade-offs that you face in your life.

Principles of Macroeconomics (MindTap Course List)

What are the three viewpoints of product life cycle? How do they differ?

Cornerstones of Cost Management (Cornerstones Series)