INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Textbook Question
Chapter 14, Problem 14.7BE
Straight-line interest on bonds
• LO14–2
On January 1, a company issued 3%, 20-year bonds with a face amount of $80 million for $69,033,776 to yield 4%. Interest is paid semiannually. What was the straight-line interest expense on the December 31 annual income statement?
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Question 9
Vadercat Limited issued $15 million 4.0 percent, 8 year bonds on
September 1, 2023. The market rate of interest on the date of the
issue was 4.5 percent. Interest is payable semi-annually on March 1
and September 1. The company's year-end is December 31.
Required:
a. Prepare all journal entries required to record the bonds in the
company's financial records for the first full year the bonds are
outstanding. The company uses the straight-line method of
amortizations.
b. Indicate how the bond obligation would be shown on the
company's year-end statement of financial position.
c. How much interest expense, related to this security, is shown
on the 2023 year end income statement?
d. How much interest expense, related to this security, will be
shown on the 2024 year end income statement?
Required information
Exercise 9-11B Record bonds issued at a discount and related semiannual interest (LO9-6)
[The following information applies to the questions displayed below]
On January 1, Year 1, a company issues $500,000 of 6% bonds, due in 20 years, with interest payable semiannually on
June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 7%, the bonds will issue at $446,611.
Exercise 9-11B Part 2
2. Record the bond issue on January 1, Year 1, and the first two semiannual interest payments on June 30, Year 1, and December 31,
Year 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round
your final answers to the nearest whole dollar.)
View transaction list
Journal entry worksheet
1
2
3
Record the bond issue.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
January 01
Cash
446,611
Discount on Bonds Payable
Bonds Payable
Record entry
Clear entry
View…
x
Premium Amortization
On the first day of the fiscal year, a company issues a $8,500,000, 9%, 10-year bond that pays semiannual interest of $382,500 ($8,500,000 × 9% × ½), receiving cash of $9,077,589.
Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Interest Expense
fill in the blank
fill in the blank
Premium on Bonds Payable
fill in the blank
fill in the blank
Cash
Chapter 14 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
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