III. Bonds Payable issue and amortization
Carson Company issued $1,000,000 of corporate bonds on January 1, 2016. The bonds have a stated rate of 4 percent, and a 10 year life. The bonds were issued to yield 3 percent. The bonds pay interest annually, each December 31, starting December 31, 2016.
A. Calculate the issue price of the bonds at 1/1/16. Show your assumptions for your calculations.
B. Prepare an amortization schedule for the bonds through December 31, 2017.
C. Prepare the following journal entries:
1. Issue of the bonds on January 1, 2016.
2. Payment of interest (and related amortization) on December 31, 2016.
3. Early retirement of the bonds on December 31, 2017, for 101 (101 percent of face value) after the second interest payment.
IV. Refer back to the information in Part III. Assume that Carsonâs year end financial statement date is March 31, 2016.
A. Prepare the adjusting journal entry at March 31, 2016, to record the accrual of interest and related amortization.
B. Prepare the journal entry to pay the first interest payment on December 31, assuming reversing journal entries were posted at the beginning of the new year (April 1, 2016).
C. Prepare the journal entry to pay the first interest payment on December 31, assuming NO reversing journal entries were posted at the beginning of the new year (April 1, 2016).
III. Bonds Payable issue and amortization
Carson Company issued $1,000,000 of corporate bonds on January 1, 2016. The bonds have a stated rate of 4 percent, and a 10 year life. The bonds were issued to yield 3 percent. The bonds pay interest annually, each December 31, starting December 31, 2016.
A. Calculate the issue price of the bonds at 1/1/16. Show your assumptions for your calculations.
B. Prepare an amortization schedule for the bonds through December 31, 2017.
C. Prepare the following journal entries:
1. Issue of the bonds on January 1, 2016.
2. Payment of interest (and related amortization) on December 31, 2016.
3. Early retirement of the bonds on December 31, 2017, for 101 (101 percent of face value) after the second interest payment.
IV. Refer back to the information in Part III. Assume that Carsonâs year end financial statement date is March 31, 2016.
A. Prepare the adjusting journal entry at March 31, 2016, to record the accrual of interest and related amortization.
B. Prepare the journal entry to pay the first interest payment on December 31, assuming reversing journal entries were posted at the beginning of the new year (April 1, 2016).
C. Prepare the journal entry to pay the first interest payment on December 31, assuming NO reversing journal entries were posted at the beginning of the new year (April 1, 2016).
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. |
