Under straight line amortization method, an equal amount of premium is amortized each period.
To prepare:
Amortization table.
To determine
(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 discuss:
If the constructed factory will be recorded as an asset in the company’s books.
To determine
(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 discuss:
If the bonds are to be recorded as a liability in the company’s books.
Tamarisk Co. is building a new hockey arena at a cost of $2,630,000. It received a downpayment of $520,000 from local businesses to support the project, and now needs to borrow $2,110,000 to complete the project. It therefore decides to issue $2,110,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 11%.
Skysong Co. is building a new hockey arena at a cost of $2,310,000. It received a downpayment of $490,000 from local businesses to support the project, and now needs to borrow $1,820,000 to complete the project. It therefore decides to issue $1,820,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 11%.
Assume that on July 1, 2022, Skysong Co. redeems half of the bonds at a cost of $1,001,900 plus accrued interest. Prepare the journal entry to record this redemption. (to record Interest and to record reacquisition)
Cheyenne Co. is building a new hockey arena at a cost of $2,460,000. It received a downpayment of $500,000 from local businesses to support the project and now needs to borrow $1,960,000 to complete the project. It therefore decides to issue $1,960,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 9%.
Collapse question part(a)
Correct answer. Your answer is correct.Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
DateAccount Titles and ExplanationDebitCreditJanuary 1, 2019Entry field with correct answerCashEntry field with correct answer2,085,786Entry…