On January 1, 2016, Knorr Corporation issued $1,000,000 of 9%,5-years bonds dated January 1, 2016. The bonds pay interestannually on December 31. The bonds were issued to yield 10%. Bondissue costs associated with the bonds totaled $18,000.
Required:
1. Prepare the journal entries to record the following:
Jan. 1, 2016 - Sold the bonds at an effective rate of 10%
Dec. 31, 2016- First interest payment using the effectiveinterest method
Dec. 31, 2016- Amortization of bonds issue cost using thestraight-line method
Dec. 31, 2016- Second interest payment using the effectiveinterest method
Dec. 31,2016- Amortization of bond issued costs using thestraight-line method
On January 1, 2016, Knorr Corporation issued $1,000,000 of 9%,5-years bonds dated January 1, 2016. The bonds pay interestannually on December 31. The bonds were issued to yield 10%. Bondissue costs associated with the bonds totaled $18,000.
Required:
1. Prepare the journal entries to record the following:
Jan. 1, 2016 - Sold the bonds at an effective rate of 10%
Dec. 31, 2016- First interest payment using the effectiveinterest method
Dec. 31, 2016- Amortization of bonds issue cost using thestraight-line method
Dec. 31, 2016- Second interest payment using the effectiveinterest method
Dec. 31,2016- Amortization of bond issued costs using thestraight-line method
Related questions
Chowan Corporation issued $115,000 of 9% bonds dated January 1,2016, for $111,283.65 on January 1, 2016. The bonds are dueDecember 31, 2019, were issued to yield 10%, and pay interestsemiannually on June 30 and December 31. Chowan uses the effectiveinterest method of amortization.
Required:
| Prepare the journal entries torecord the issue of the bonds on January 1, 2016, and the interestpayments on June 30, 2016, December 31, 2016, and June 30, 2017. Inaddition, prepare a bond interest expense and discount amortizationschedule for the bonds through June 30, 2017. |
| BONDS |
| On January 1, 2016, Lagune& Sons issued 9% bonds dated January 1, 2016, with a faceamount of $200,000. The bonds sold for $182,841 and mature in 20years. The effective interest rate for these bonds was 10%.Interest is paid semiannually on July 1 and December 31. Lagune'sfiscal year is the calendar year. |
REQUIRED:
| 1. Prepare the journal entryto record the bond issuance on January 1, 2016. |
| 2. Prepare the entry to record interest onJuly 1, 2016, using the effective interest method. |
| 3. Prepare the necessary journal entry onDecember 31, 2016. |
| 4. Prepare the entry to record interest onJuly 1, 2016, using the straight-line method. |
| 5. Prepare the necessary journal entry onDecember 31, 2016 using the straight-line methods. |
