ABCCorporation issued 14%, 5-year bonds with a par value of $5,000,000on January 1, 2015. Interest is to be paid semiannually on eachJune 30 and December 31. The bonds were issued at $5,368,035 cashwhen the market rate for this bond was 12%.
(a) Prepare the general journal entry to record the issuance of thebonds on January 1, 2015.
1/1/15
(b) Show how the bonds would bereported on ABC's balance sheet at January 1, 2015.
Long-Term liabilities:
(c) Assume that ABC uses the effectiveinterest method for amortizing any discount or premium on bonds.Prepare the general journal entry to record the first semiannualinterest payment on June 30, 2015. SHOW YOUR CALCULATIONS!
6/30/15
(d) Assume instead that ABC uses the straight-line method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the first semiannual interest payment onJune 30, 2015. SHOW YOUR CALCULATIONS!
6/30/15
(e) Assume that ABC uses the effective interest method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the second semiannual interest payment onDecember 31, 2015. SHOW YOUR CALCULATIONS!
12/31/15
ABCCorporation issued 14%, 5-year bonds with a par value of $5,000,000on January 1, 2015. Interest is to be paid semiannually on eachJune 30 and December 31. The bonds were issued at $5,368,035 cashwhen the market rate for this bond was 12%.
(a) Prepare the general journal entry to record the issuance of thebonds on January 1, 2015.
1/1/15 | |||
(b) Show how the bonds would bereported on ABC's balance sheet at January 1, 2015.
Long-Term liabilities: | ||
(c) Assume that ABC uses the effectiveinterest method for amortizing any discount or premium on bonds.Prepare the general journal entry to record the first semiannualinterest payment on June 30, 2015. SHOW YOUR CALCULATIONS!
6/30/15 | |||
(d) Assume instead that ABC uses the straight-line method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the first semiannual interest payment onJune 30, 2015. SHOW YOUR CALCULATIONS!
6/30/15 | |||
(e) Assume that ABC uses the effective interest method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the second semiannual interest payment onDecember 31, 2015. SHOW YOUR CALCULATIONS!
12/31/15 | |||
Related questions
| There are three problems thisweek. Click the tabs at the bottom of the spreadsheet to accesseach one. | |||||||
| On 1/1/2015, Snickers Company issued 10-year bondswith a face value of $700,000 at 101. The bonds carry a statedinterest rate of 8%, with | |||||||
| interest payable semi-annually on January 1 andJuly 1. Snickers uses the straight-line method of amortizing bondpremium or discount. | |||||||
| (a) Prepare the journal entry to record theissuance of the bonds. | |||||||
| (b) Prepare the journal entry to record payment ofinterest on July 1, 2015. | |||||||
| (c) Prepare the adjusting entry to record theaccrual of interest on December 31, 2015. | |||||||
| (d) Prepare the balance sheet presentation for thebond on 12/31/2015. | |||||||
| (e) Prepare the balance sheet presentation for thebond on 12/31/2016. | |||||||
| Solutions: | |||||||
| Date | Account | Debit | Credit | ||||
| 1/1/2015 | Cash | 707,000 | |||||
| Bonds Payable | 700,000 | ||||||
| Premium on Bonds Payable | 7,000 | ||||||
| 7/1/2015 | Interest Expense | 28,000 | Note that it would also be correct to combine thetwo entries into one. | ||||
| Cash | 28,000 | ||||||
| Premium on Bonds Payable | 350 | ||||||
| Interest Expense | 350 | ||||||
| 12/31/2015 | Interest Expense | 28,000 | Note that it would also be correct to combine thetwo entries into one. | ||||
| Interest Payable | 28,000 | ||||||
| Premium on Bonds Payable | 350 | ||||||
| Interest Expense | 350 | ||||||
| Snickers Corporation | |||||||
| Balance Sheet (Partial) | |||||||
| 12/31/2015 | |||||||
| Long Term Liabilities | |||||||
| Bonds Payable | 700,000 | ||||||
| Add: Premium on Bonds Payable | 6,300 | ||||||
| 706,300 | |||||||
| Snickers Corporation | |||||||
| Balance Sheet (Partial) | |||||||
| 12/31/2016 | |||||||
| Long Term Liabilities | |||||||
| Bonds Payable | 700,000 | ||||||
| Add: Premium on Bonds Payable | 5,600 | ||||||
| 705,600 | |||||||
| Hillside issues $2,200,000 of 7%, 15-year bonds dated January 1,2015, that pay interest semiannually on June 30 and December 31.The bonds are issued at a price of $1,901,046.
|
