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

Entries for bonds payable and installment note transactions The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 2016 July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 2016. at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Oct. 1. Borrowed $200,000 by issuing a six-year. 6% installment note to Nicks Bank. The note requires annual payments of $40,673, with the first payment occurring on September 30. 2017. Dec. 31. Accrued $3,000 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. 2017 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Sept. 30. Paid the annual payment on the note, which consisted of interest of $12,000 and principal of $28 , 673. Dec. 31. Accrued $2,570 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. 2018 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Sept. 30. Paid the second annual payment on the note, which consisted of interest of $10,280 and principal of $30,393. Instructions 1. Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar. 2. Indicate the amount of the interest expense in (a) 2016 and (b) 2017. 3. Determine the carrying amount of the bonds as of December 31, 2017.

BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

Solutions

Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 12, Problem 12.4APR
Textbook Problem
1 views

Entries for bonds payable and installment note transactions

The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:

2016

July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 2016. at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30.
Oct. 1. Borrowed $200,000 by issuing a six-year. 6% installment note to Nicks Bank.
The note requires annual payments of $40,673, with the first payment occurring on September 30. 2017.
Dec. 31. Accrued $3,000 of interest on the installment note. The interest is payable on the date of the next installment note payment.
31.  Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment.
31. Closed the interest expense account.
2017  
June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment.
Sept. 30.  Paid the annual payment on the note, which consisted of interest of $12,000 and principal of $28,673.
Dec. 31. Accrued $2,570 of interest on the installment note. The interest is payable on the date of the next installment note payment.
31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment.
31. Closed the interest expense account.
2018
June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only.)
Sept. 30. Paid the second annual payment on the note, which consisted of interest of $10,280 and principal of $30,393.

Instructions

  1. 1. Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar.
  2. 2. Indicate the amount of the interest expense in (a) 2016 and (b) 2017.
  3. 3. Determine the carrying amount of the bonds as of December 31, 2017.

1.

To determine

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.

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

Installment note: It is a debt in which the borrower is required to pay equal periodic payments to the lender based on the term of the note.

To Journalize: The entries to record the transactions.

Explanation of Solution

Journalize the entries to record the transactions.

Date Accounts and Explanation Post Ref.

Debit

($)

Credit

($)

2016 Cash   63,532,267  
July  1 Discount on Bonds Payable (1)   10,467,733  
  Bonds Payable     74,000,000
  (To record issue of bonds at discount)      
         
October 1 Cash   200,000  
  Notes Payable     200,000
  (To record issue of 6% notes for cash)      
         
December 31 Interest Expense   3,000  
  Interest Payable     3,000
  (To record interest accrued on installment note)      
         
December 31 Interest Expense (4)   4,331,693  
         Discount on Bonds Payable (2)     261,693
  Cash (3)     4,070,000
  (To record semiannual interest payment and amortization on bonds)      

Table (1)

Date Accounts and Explanation Post Ref.

Debit

($)

Credit

($)

2017 Interest Expense (4)   4,331,693  
June 30        Discount on Bonds Payable (2)     261,693
  Cash (3)     4,070,000
  (To record semiannual interest payment and amortization on bonds)      
         
September 30 Interest Expense   9,000  
  Interest Payable   3,000  
  Notes Payable   28,673  
  Cash     40,673
  (To record the annual payment on note)      
         
December 31 Interest Expense   2,570  
  Interest Payable     2,570
  To record interest accrued on installment note)      
         
December 31 Interest Expense (4)   4,331,693  
         Discount on Bonds Payable (2)     261,693
  Cash (3)     4,070,000
  (To record semiannual interest payment and amortization on bonds)      

Table (2)

Date Accounts and Explanation Post Ref.

Debit

($)

Credit

($)

2018 Bonds Payable   74,000,000  
June 30 Loss on Redemption of Bonds (6)   7,940,961  
          Discount on Bonds Payable     9,420,961
  Cash (5)     72,520,000
  (To record redemption of bonds)      
         
September 30 Interest Expense   7,710  
  Interest Payable   2,570  
  Notes Payable   30,393  
  Cash     40,673
  (To record the annual payment on note)      

Table (3)

Working notes:

Calculate discount on bonds payable.

Discount on bonds payable = (Face value  Cash received)   =$74,000,000$63,532,267=$10,467,733 (1)

Calculate discount on bonds payable semiannually

2.

a.

To determine
The amount of interest expense in 2016.

b.

To determine
The amount of interest expense in 2017.

3.

To determine
  The carrying amount of bonds as of December 31, 2017.

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 12 Solutions

Financial & Managerial Accounting
Show all chapter solutions
add
Ch. 12 - Alternative financing plans Owen Co. is...Ch. 12 - Alternative financing plans Browser Co. is...Ch. 12 - Issuing bonds at face amount On January 1, the...Ch. 12 - Issuing bonds at face amount On January 1, the...Ch. 12 - Issuing bonds at a discount On the first day of...Ch. 12 - Issuing bonds at a discount On the first day of...Ch. 12 - Discount amortization Using the bond from Practice...Ch. 12 - Discount amortization Using the bond from Practice...Ch. 12 - Issuing bonds at a premium On the first day of the...Ch. 12 - Issuing bonds at a premium On the first day of the...Ch. 12 - Premium amortization Using the bond from Practice...Ch. 12 - Premium amortization Using the bond from Practice...Ch. 12 - Redemption of bonds payable A 1,500,000 bond Issue...Ch. 12 - Redemption of bonds payable A 500,000 bond issue...Ch. 12 - Journalizing installment notes On the first day of...Ch. 12 - Journalizing installment notes On the first day of...Ch. 12 - Number of times interest charges are earned Berry...Ch. 12 - Number of times interest charges are earned...Ch. 12 - Effect of financing on earnings per share Domanico...Ch. 12 - Evaluate alternative financing plans Based on the...Ch. 12 - Corporate financing The financial statements for...Ch. 12 - Bond price United States Steels 7.375% bonds due...Ch. 12 - Entries for issuing bonds Gabriel Co. produces and...Ch. 12 - Entries for issuing bonds and amortizing discount...Ch. 12 - Entries for issuing bonds and amortizing premium...Ch. 12 - Entries for issuing and calling bonds; loss Adele...Ch. 12 - Entries for issuing and calling bonds; gain Emil...Ch. 12 - Entries for installment note transactions On the...Ch. 12 - Entries for installment note transactions On...Ch. 12 - Entries for installment note transactions On...Ch. 12 - Reporting bonds At the beginning of the current...Ch. 12 - Number of times interest charges are earned The...Ch. 12 - Number of times interest charges are earned...Ch. 12 - Number of times interest charges are earned...Ch. 12 - Present value of amounts due Tommy John is going...Ch. 12 - Present value of an annuity Determine the present...Ch. 12 - Present value of an annuity On January 1, 2016,...Ch. 12 - Present value of an annuity Assume the same data...Ch. 12 - Present value of bonds payable; discount Pinder...Ch. 12 - Present value of bonds payable; premium Moss Co....Ch. 12 - Amortize discount by interest method On the first...Ch. 12 - Amortize premium by interest method Shunda...Ch. 12 - Compute bond proceeds, amortizing premium by...Ch. 12 - Compute bond proceeds, amortizing discount by...Ch. 12 - Effect of financing on earnings per share Three...Ch. 12 - Bond discount, entries for bonds payable...Ch. 12 - Bond premium, entries for bonds payable...Ch. 12 - Entries for bonds payable and installment note...Ch. 12 - Bond discount entries for bonds payable...Ch. 12 - Bond premium, entries for bonds payable...Ch. 12 - Effect of financing on earnings per share Three...Ch. 12 - Bond discount entries for bonds payable...Ch. 12 - Bond premium, entries for bonds payable...Ch. 12 - Entries for bonds payable and installment note...Ch. 12 - Bond discount, entries for bonds payable...Ch. 12 - Bond premium, entries for bonds payable...Ch. 12 - General Electric bond issuance General Electric...Ch. 12 - Ethics and professional conduct in business Solar...Ch. 12 - Present values Alex Kelton recently won the...Ch. 12 - Preferred stock vs. bonds Xentec Inc. has decided...Ch. 12 - Financing business expansion You hold a 25% common...Ch. 12 - Number of times interest charges are earned The...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
List seven reasons risk management might increase the value of a firm.

Fundamentals of Financial Management (MindTap Course List)

OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its WACC is 125%. The company is considering the fo...

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

FOB shipping point means that transportation charges are paid by the seller.

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

How do the income statements of a manufacturing firm and a service firm differ?

Cornerstones of Cost Management (Cornerstones Series)