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

Bond premium, entries for bonds payable transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, 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 on July 1, 20Y1. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. 3. Determine the total interest expense for 20Y1. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. (Appendix 1) Compute the price of $73,100,469 received for the bonds by using the present value tables in Appendix A at the end of the text. Round to the nearest dollar.

BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

Solutions

Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 11, Problem 2PB
Textbook Problem
1 views

Bond premium, entries for bonds payable transactions

Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, 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. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.
  2. 2. Journalize the entries to record the following:
    1. a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.
    2. b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.
  3. 3. Determine the total interest expense for 20Y1.
  4. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?
  5. 5. (Appendix 1) Compute the price of $73,100,469 received for the bonds by using the present value tables in Appendix A at the end of the text. Round to the nearest dollar.

1.

To determine

Prepare journal entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.

Explanation of Solution

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.

Straight-line amortization method: It is a method of bond amortization that spreads the amount of the bond discount equally over the interest period.

Prepare journal entry for cash proceeds from the issuance of the bonds on July 1, 20Y1.

DateAccount Title and ExplanationPost RefDebit ($)Credit ($)
20Y1Cash  73,100,469 
July1 Premium on Bonds Payable (1)  8,100,469
   Bonds Payable  65,000,000
    (To record issue of bonds at premium)   

Table (1)

  • Cash is an asset and it is increased...

2. a.

To determine

Prepare journal entry to record first semiannual interest payment and amortization of bond premium on December 31, 20Y1.

2. b.

To determine

Prepare journal entry to record second interest payment and amortization of bond discount on June 30, 20Y2.

3.

To determine

Determine the amount of total interest expense for 20Y1.

4.

To determine

Explain the situation when contract rate of bond is greater than the market rate of interest.

5.

To determine

Calculate the amount of cash proceeds (present value) from the sale of the bonds using present value tables.

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

Financial And Managerial 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 An 800,000 bond issue...Ch. 11 - Times interest earned Averill Products Inc....Ch. 11 - Bond price United States Steel Corporations (X)...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 - Appendix 2 Amortize premium by interest method...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 - Appendix 1 and Appendix 2 Bond discount, entries...Ch. 11 - Appendix 1 and Appendix 2 Bond premium, entries...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 - Appendix 1 and Appendix 2 Bond discount, entries...Ch. 11 - Appendix 1 and Appendix 2 Bond premium, entries...Ch. 11 - Analyze and compare Amazon.com and Wal-Mart...Ch. 11 - Analyze and compare Clorox and Procter Gamble The...Ch. 11 - Analyze Aeropostale Aeropostale, Inc. (ARO) is a...Ch. 11 - Analyze and compare Hilton and Marriott Hilton...Ch. 11 - Ethics in Action CEG Capital Inc. is a large...Ch. 11 - Communication Nordbock Inc. reports the following...Ch. 11 - Present values Alex Kelton recently won the...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
What is a SSAE 16 report?

Accounting Information Systems

What is a trademark?

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

TIME VALUE OF MONEY Answer the following questions: a. Assuming a rate of 10% annually, find the FV of 1,000 af...

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