(a)
Introduction:
A bond is long term liability wherein the issuer is entitled to pay the face value of the bond at the time of maturity and make interest payments periodically. It is a breakdown of large debt to borrow as it may be too large for an individual lender.
To record:
(b)
Introduction:
A bond is long term liability wherein the issuer is entitled to pay the face value of the bond at the time of maturity and make interest payments periodically. It is a breakdown of large debt to borrow as it may be too large for an individual lender.
To record:
(c)
Introduction:
A bond is long term liability wherein the issuer is entitled to pay the face value of the bond at the time of maturity and make interest payments periodically. It is a breakdown of large debt to borrow as it may be too large for an individual lender.
To record:
Journal entry for interest expense for year 2021 and repayment of bond.
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Chapter 9 Solutions
Cornerstones of Financial Accounting
- Exercise Bonds with Annual Interest Payments Kiwi Corporation issued at par $350,000, 9% bonds on January 1, 2020. Interest is paid annually on December 31. The principal and the final interest payment are due on December 31, 2021. Required: Prepare the entry to recognize the issuance of the bonds. Prepare the journal entry for December 31, 2020. Prepare the journal entry to record repayment of the principal on December 31, 2021. CONCEPTUAL CONNECTIONHow would the interest expense for 2020 change if the bonds had been issued at a premium?arrow_forwardBrief Exercise (Appendix 9A) Bond Issue Price On January 1, 2020, Ruby Inc. issued 3,000 $1,000 par value bonds with a staled rate of6% and a 10-year maturity. Interest is payable semiannually on June 30 and December 31. Required: What is the issue price if the bonds are sold to yield 8%? {Note: Round to nearest dollar.)arrow_forwardBrief 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%.arrow_forward
- Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.arrow_forwardExercise Interest Payments and Interest Expense for Bonds (Straight Line) On January 1, 2020, Perry Manufacturing issued bonds with a total face amount of $3,000,000 and a stated rate of 9%. Required: Calculate the interest expense for 2020 if the bonds were sold at par. Calculate the interest expense for 2020 if the bonds were sold at a premium and the straight- line premium amortization for 2020 is $12,000. 3. Calculate the interest expense for 2020 if the bonds were sold at a discount and the straight- line discount amortization for 2020 is $33,000.arrow_forwardBrief Exercise Debt Issued at Par On January 1, 2020, Desmond & Co. issued 5,000 bonds with a SI,000 par value at 100. The bonds have an 8% stated rate, pay interest on June 30 and December 31, and mature on December 31 2020. Required: Prepare the journal entries to record the interest payment on June 30, 2020.arrow_forward
- Cornerstone Exercise Bonds Issued at a Discount (Effective Interest) Refer to the information for Sicily Corporation above. Required: Prepare the journal entries for December 31, 2020 and 2021. Use the following information for Cornerstone Exercises 9-33 and 9-34: Crafty Corporation issued 5475,000 of 5%, 7-year bonds on January 1, 2020, for $448,484. Interest is paid annually on December 31. The market rate of interest is 6%.arrow_forwardCornerstone Exercise Debt Issued at a Premium (Straight Line) Refer to the information for Ironman Steel above. Required: Prepare the amortization table for Ironman Steels bonds(Note: Round to the nearest dollar.) Use the following information for Cornerstone Exercises 9-31 and 9-32: Sicily Corporation issued $300,000 in 5% bonds (payable on December 31, 2029) on January 1, 2020, for $257,363. Interest is paid on June 30 and December 31. The market rate of interest is 7%.arrow_forwardBats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortizationarrow_forward
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