For unlimited access to Homework Help, a Homework+ subscription is required.
Related questions
Stowers Research issues bonds dated January 1, 2011, that payinterest semiannually on June 30 and December 31. The bonds have a$34,000 par value and an annual contract rate of 8%, and theymature in 10 years. |
Required: |
Consider each of the following three separate situations. (UseTableB.1, TableB.3) |
1. | The market rate at the date of issuance is 6%. |
(a) | Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to4 decimal places, intermediate calculations and final answer to thenearest dollar amount. Omit the "$" sign in yourresponse.) |
Issue price | $ |
(b) | Prepare the journal entry to record their issuance. (Round "PV Factors" to4 decimal places, intermediate calculations and final answers tothe nearest dollar amount. Omit the "$" sign in yourresponse.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)Premium on bonds payableAccountsreceivableCashDiscount on bonds payableBond interest payableBondinterest expenseBonds payableAccounts payable | ||
(Click to select)AccountsreceivablePremium on bonds payableAccounts payableBonds payableBondinterest payableDiscount on bonds payableCashBond interestexpense | |||
(Click to select)Discounton bonds payablePremium on bonds payableAccounts payableBondinterest payableAccounts receivableCashBonds payableBond interestexpense | |||
2. | The market rate at the date of issuance is 8%. |
(a) | Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answer to the nearest dollar amount. Omit the "$" sign inyour response.) |
Issue price | $ |
(b) | Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answers to the nearest dollar amount. Omit the "$" signin your response.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)Bond interest expensePremium on bondspayableBonds payableDiscount on bonds payableBond interestpayableAccounts receivableAccounts payableCash | ||
(Click to select)Premiumon bonds payableAccounts receivableDiscount on bonds payableBondinterest payableAccounts payableCashBond interest expenseBondspayable | |||
3. | The market rate at the date of issuance is 10%. |
(a) | Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answer to the nearest dollar amount. Omit the "$" sign inyour response.) |
Issue price | $ |
(b) | Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answers to the nearest dollar amount. Omit the "$" signin your response.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)Bonds payableCashDiscount on bondspayablePremium on bonds payableAccounts receivableAccountspayableBond interest payableBond interest expenses | ||
(Click to select)Bonds payableCashPremium on bondspayableAccounts payableDiscount on bonds payableBond interestexpensesAccounts receivableBond interest payable | |||
(Click to select)BondspayableBond interest expenseAccounts receivableCashAccountspayablePremium on bonds payableDiscount on bonds payableBondinterest payable | |||
Stowers Research issues bonds dated January 1, 2011, that payinterest semiannually on June 30 and December 31. The bonds have a$34,000 par value and an annual contract rate of 8%, and theymature in 10 years. |
Required: |
Consider each of the following three separate situations. (UseTableB.1, TableB.3) |
1. | The market rate at the date of issuance is 6%. |
(a) | Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to4 decimal places, intermediate calculations and final answer to thenearest dollar amount. Omit the "$" sign in yourresponse.) |
Issue price | $ |
(b) | Prepare the journal entry to record their issuance. (Round "PV Factors" to4 decimal places, intermediate calculations and final answers tothe nearest dollar amount. Omit the "$" sign in yourresponse.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)CashDiscount on bonds payableAccountsreceivableBond interest payableBond interest expensePremium onbonds payableAccounts payableBonds payable | ||
(Click to select)Premiumon bonds payableBond interest expenseBonds payableCashDiscount onbonds payableAccounts payableAccounts receivableBond interestpayable | |||
(Click to select)Bondinterest payableDiscount on bonds payableAccounts payablePremium onbonds payableBonds payableBond interest expenseAccountsreceivableCash | |||
2. | The market rate at the date of issuance is 8%. |
(a) | Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answer to the nearest dollar amount. Omit the "$" sign inyour response.) |
Issue price | $ |
(b) | Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answers to the nearest dollar amount. Omit the "$" signin your response.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)Accounts receivableBond interestexpenseBond interest payableBonds payableCashAccountspayablePremium on bonds payableDiscount on bonds payable | ||
(Click to select)AccountspayableDiscount on bonds payablePremium on bonds payableBondinterest expenseCashAccounts receivableBond interest payableBondspayable | |||
3. | The market rate at the date of issuance is 10%. |
(a) | Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answer to the nearest dollar amount. Omit the "$" sign inyour response.) |
Issue price | $ |
(b) | Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculationsand final answers to the nearest dollar amount. Omit the "$" signin your response.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)Bond interest payableAccountsreceivableBond interest expensesAccounts payableCashDiscount onbonds payablePremium on bonds payableBonds payable | ||
(Click to select)Accounts receivablePremium on bondspayableDiscount on bonds payableBond interest expensesCashBondspayableBond interest payableAccounts payable | |||
(Click to select)Premiumon bonds payableCashDiscount on bonds payableAccountsreceivableBonds payableBond interest expenseAccounts payableBondinterest payable | |||
Heathrow issues $2,200,000 of 7%, 15-year bonds dated January 1,2011, that pay interest semiannually on June 30 and December 31.The bonds are issued at a price of $2,692,790. |
Required: | |
1. | Prepare the January 1, 2011, journal entry to record thebonds%u2019 issuance. (Omit the "$" sign in your response.) |
Date | General Journal | Debit | Credit |
Jan. 1 | (Click to select)Discount on bonds payableBond interestexpenseAccounts receivableBond interest payableAccountspayablePremium on bonds payableBonds payableCash | ||
(Click to select)AccountsreceivablePremium on bonds payableBond interest payableAccountspayableBonds payableCashBond interest expenseDiscount on bondspayable | |||
(Click to select)Premiumon bonds payableCashAccounts payableBond interest expenseBondinterest payableDiscount on bonds payableBonds payableAccountsreceivable | |||
2(a) | For each semiannual period, compute the cash payment. (Omit the "$" sign inyour response.) |
Cash payment | $ |
2(b) | For each semiannual period, compute the the straight-line premiumamortization. (Round your answer tothe nearest dollar amount. Omit the "$" sign inyour response.) |
Amount of premium amortized | $ |
2(c) | For each semiannual period, compute the the bond interest expense.(Omit the "$" sign inyour response.) |
Bond interest expense | $ |
3. | Determine the total bond interest expense to be recognized over thebonds' life. (Omit the "$" sign in yourresponse.) |
Total bond interest expense | $ |
4. | Prepare the first two years of an amortization table using thestraight-line method. (Omit the "$" sign in yourresponse.) |
Semiannual Period-End | Unamortized Premium | Carrying Value |
1/01/2011 | $ | $ |
6/30/2011 | ||
12/31/2011 | ||
6/30/2012 | ||
12/31/2012 | ||
5. | Prepare the journal entries to record the first two interestpayments. (Omit the "$" sign in yourresponse.) |
Date | General Journal | Debit | Credit |
June 30 | (Click to select)Premium on bonds payableBond interestpayableDiscount on bonds payableBonds payableBond interestexpenseCashAccounts receivableAccounts payable | ||
(Click to select)Accounts payablePremium on bondspayableCashDiscount on bonds payableBonds payableBond interestexpenseAccounts receivableBond interest payable | |||
(Click to select)AccountspayableCashBond interest expenseAccounts receivablePremium on bondspayableBonds payableDiscount on bonds payableBond interestpayable | |||
Dec. 31 | (Click to select)Bond interest expenseAccountsreceivableDiscount on bonds payablePremium on bonds payableCashBondinterest payableAccounts payableBonds payable | ||
(Click to select)Premium on bonds payableAccountsreceivableBond interest payableAccounts payableDiscount on bondspayableBond interest expenseBondspayableCash | |||
(Click to select)AccountsreceivableAccounts payableDiscount on bonds payableCashBondinterest expenseBond interest payablePremium on bonds payableBondspayable | |||