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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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Brief ExerciseBonds Issued at a Premium (Effective Interest)

Refer to the information above for Haley Industries.

Required:

Prepare the journal entry for December 31, 2022 and 2023.

Use the following information for Brief Exercises 9-55 and 9-58:

Haley Industries issued $120,000 of 11% , 7-year bonds on January 1, 2020, with $5,842 pre- mium. Interest is paid annually on December 31. The market rate of interest is 10%.

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.

To prepare:

The Journal entries as on Dec. 31, 2022 and Dec. 31, 2023.

Explanation

The Journal entries as on Dec. 31, 2022 and Dec. 31, 2023 are explained as follows:

Crafty Corporation
Journal Entries
Date Account Titles Debit Credit
Dec...

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