E14-11.
(Information Related to Various Bond Issues)
(LO 1) Karen Austin Inc. has issued three types of debt onJanuary 1, 2017, the start of the company's fiscal year.
(a)$10 million, 10-year, 15% unsecured bonds,interest payable quarterly. Bonds were priced to yield 12%.
(b)$25 million par of 10-year, zero-couponbonds at a price to yield 12% per year.
(c)$20 million, 10-year, 10% mortgage bonds,interest payable annually to yield 12%.
Instructions
Prepare a schedule that identifies the following items for eachbond: (1) maturity value, (2) number of interest periods over lifeof bond, (3) stated rate per each interest period, (4)effective-interest rate per each interest period, (5) paymentamount per period, and (6) present value of bonds at date ofissue.
E14-11.
(Information Related to Various Bond Issues)
(LO 1) Karen Austin Inc. has issued three types of debt onJanuary 1, 2017, the start of the company's fiscal year.
(a)$10 million, 10-year, 15% unsecured bonds,interest payable quarterly. Bonds were priced to yield 12%.
(b)$25 million par of 10-year, zero-couponbonds at a price to yield 12% per year.
(c)$20 million, 10-year, 10% mortgage bonds,interest payable annually to yield 12%.
Instructions
Prepare a schedule that identifies the following items for eachbond: (1) maturity value, (2) number of interest periods over lifeof bond, (3) stated rate per each interest period, (4)effective-interest rate per each interest period, (5) paymentamount per period, and (6) present value of bonds at date ofissue.
| OnJanuary 1, 2014, Buer Company issued 500 10 year bonds with $1,000face value for each bond at 102. Interest is payable on January 1and July 1 at 10%. On April 1, 2015, Buer Company reacquires andretires 50 of its own $1,000 bonds at 98 plus accrued interest. Thefiscal period for Buer Company is the calendar year. | |||||||
| Required: | |||||||
| Prepare entries to record A) The issuance of the bonds, B) theinterest payments and adjustments relating to the debt in 2014, andC) the reacquisition and retirement of bonds in 2015. Assume thepremium or discount is amortized on a straight line basis. | |||||||
| Debit | Credit | ||||||
| A) Issuance of the bonds | |||||||
| 1/1/2014 | |||||||
| B) Interest payments during2014 | |||||||
| 6/30/2014 | |||||||
| 12/31/2014 | |||||||
| C) Reacquisition of the bondsin 2015 | |||||||
| 4/1/2015 | |||||||
