The following transactions were completed by Hobson Inc., whosefiscal year is the calendar year:
2010
July 1. Issued $18,000,000 of five-year, 10% callable bonds datedJuly 1, 2010, at an effective rate of 12%, receiving cash of$16,675,184. Interest is payable semiannually on December 31 andJune 30.
Oct. 1. Borrowed $400,000 as a 10-year, 7% installment note fromMarble Bank.
The note requires annual payments of $56,951, with the firstpayment occurring on September 30, 2011.
Dec. 31. Accrued $7,000 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment.
31. Paid the semiannual interest on the bonds.
31. Recorded bond discount amortization of $132,482, which wasdetermined using the straight-line method.
31. Closed the interest expense account.
2011
June 30. Paid the semiannual interest on the bonds.
Sept. 30. Paid the annual payment on the note, which consisted ofinterest of $28,000 and principal of $28,951.
Dec. 31. Accrued $6,493 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment.
31. Paid the semiannual interest on the bonds.
31. Recorded bond discount amortization of $264,964, which wasdetermined using the straight-line method.
31. Closed the interest expense account.
2012
June 30. Recorded the redemption of the bonds, which were called at97. The balance in the bond discount account is $794,888 afterpayment of interest and amortization of discount have beenrecorded. (Record the redemption only.)
Sept. 30. Paid the second annual payment on the note, whichconsisted of interest of
$25,973 and principal of $30,978.
Instructions
1. Journalize the entries to record the foregoingtransactions.
2. Indicate the amount of the interest expense in
(a) 2010 and
(b) 2011.
3. Determine the carrying amount of the bonds as of December 31,2011.
chocolategoose86

Question

The following transactions were completed by Hobson Inc., whosefiscal year is the calendar year:
2010
July 1. Issued $18,000,000 of five-year, 10% callable bonds datedJuly 1, 2010, at an effective rate of 12%, receiving cash of$16,675,184. Interest is payable semiannually on December 31 andJune 30.
Oct. 1. Borrowed $400,000 as a 10-year, 7% installment note fromMarble Bank.
The note requires annual payments of $56,951, with the firstpayment occurring on September 30, 2011.
Dec. 31. Accrued $7,000 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment.
31. Paid the semiannual interest on the bonds.
31. Recorded bond discount amortization of $132,482, which wasdetermined using the straight-line method.
31. Closed the interest expense account.
2011
June 30. Paid the semiannual interest on the bonds.
Sept. 30. Paid the annual payment on the note, which consisted ofinterest of $28,000 and principal of $28,951.
Dec. 31. Accrued $6,493 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment.
31. Paid the semiannual interest on the bonds.
31. Recorded bond discount amortization of $264,964, which wasdetermined using the straight-line method.
31. Closed the interest expense account.
2012
June 30. Recorded the redemption of the bonds, which were called at97. The balance in the bond discount account is $794,888 afterpayment of interest and amortization of discount have beenrecorded. (Record the redemption only.)
Sept. 30. Paid the second annual payment on the note, whichconsisted of interest of
$25,973 and principal of $30,978.
Instructions
1. Journalize the entries to record the foregoingtransactions.
2. Indicate the amount of the interest expense in
(a) 2010 and
(b) 2011.
3. Determine the carrying amount of the bonds as of December 31,2011.

chocolategoose86

Date	Account	Debit	Credit
2016
July 1	Cash
	Discount on bonds payable
	Bonds payable

Oct. 1	Cash
	Notespayable

Dec. 31-Note	Interest expense
	Notespayable

Dec. 31-Bond	Interest expense




Dec. 31-Closing


2017
June 30



Sept. 30




Dec. 31-Note


Dec. 31-Bond



Dec. 31-Closing


2018
June 30




Sept. 30

Date	Account	Debit	Credit
2016
July 1	Cash
	Discount on bonds payable
	Bonds payable

Oct. 1	Cash
	Notespayable

Dec. 31-Note	Interest expense
	Notespayable

Dec. 31-Bond	Cash
	Interest expense
	Gain on bonds payable


Dec. 31-Closing	Bonds payable
	Discount onbonds payable

2017
June 30	Cash
	Discount on bonds payable
	Interest expense

Sept. 30	Interest expense

	Notes payable
	Cash

Dec. 31-Note


Dec. 31-Bond	Notes payable
	Interest expense
	Cash

Dec. 31-Closing	Discount on bonds payable
	Bondspayable

2018
June 30	Bonds payable
	Cash
	Gain on redemption of bonds


Sept. 30

	Notes payable

Unlock all answers

Related questions

Weekly leaderboard

2016
July 1.	Issued $4,370,000 of five-year, 8% callable bonds dated July 1,2016, at a market (effective) rate of 9%, receiving cash of$4,197,109. Interest is payable semiannually on December 31 andJune 30.
Oct. 1.	Borrowed $170,000 as a 10-year, 8% installment note from MarbleBank. The note requires annual payments of $25,335, with the firstpayment occurring on September 30, 2017.
Dec. 31.	Accrued $3,400 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment.
Dec. 31.	Closed the interest expense account.
2017
June 30.	Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment.
Sept. 30.	Paid the annual payment on the note, which consisted ofinterest of $13,600 and principal of $11,735.
Dec. 31.	Accrued $3,165 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment.
Dec. 31.	Closed the interest expense account.
2018
June 30.	Recorded the redemption of the bonds, which were called at 98.The balance in the bond discount account is $103,735 after paymentof interest and amortization of discount have been recorded.(Record the redemption only.)
Sept. 30.	Paid the second annual payment on the note, which consisted ofinterest of $12,661 and principal of $12,674.