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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT

In June 2020, Front Row Entertainment had the opportunity to expand its venue operations by purchasing five different venues. To finance this purchase. Front Row issued $1,500,000 of 6%, 5-year bonds on July 1, 2020. The bonds were issued for $1.378,300 and pay interest semiannually on June 30 and December 31.

Required:

  1. Assume that Front Row uses the straight-line method of amortization.
  2. Prepare an amortization table through December 31, 2021. (Note: Round to the nearest dollar.)
  3. Prepare the journal entry required at December 31, 2020.

c. How will the bonds be shown on the December 31, 2020 balance sheet?

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

Requirement 1:

To prepare:

The Bond Amortization table using the Straight Line method.

Explanation

The Bond Amortization table using the Straight Line method is as follows:

Front Row Entertainment
Amortization Table
Straight line method
Date Cash Payment (Credit) Interest Expense (Debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value
A=1500000*6%/2 B=A-C C = 121700/10 D = D-C F = 1500000-D
June. 30, 2020 $ - $ - $ - $ 121,700 $ 1,378,300
Dec. 31, 2020 $ 45,000 $ 57,170 $ 12,170 $ 109,530 $ 1,390,470
June. 30, 2021 $ 45,000 $ 57,170 $ 12,170 $ 97,360 $ 1,402,640
Dec...
To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

Requirement 2:

To prepare:

The Journal entry as on Dec. 31, 2020.

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

Requirement 3:

To indicate:

The balance sheet presentation of Bonds payable as on Dec. 31, 2020.

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