1. On January 1, 2015 James Bond & Company issued 5-yearbonds with a face value of $500,000. The bonds carry a statedinterest rate of 7%. The straight-line method is used to amortizepremiums & discounts.
a. Prepare the journal entry for the issuance assuming the bondsare issued at 97.
i. Was the market interest rate higher or lower than the statedinterest at issue?
ii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on December 31.
iii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on January 1, 2016
b. Prepare the journal entry for the issuance assuming the bondsare issued at 102.
i. Was the market interest rate higher or lower than the statedinterest at issue?
ii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on December 31.
iii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on January 1, 2016.
iv. Prepare the journal entry at maturity assuming that interesthas been accrued and paid.
2. Record journal entries for the following transactionsconcerning current & long-term liabilities at Lubar Corp..
a. On January 1, 2015 the corporation acquired a building bysigning an $800,000, 10%, 5-year mortgage note payable. The termsprovide for yearly installment payments of $211,038 on December31.
b. On January 1, 2015 the corporation issued a $400,000, 11%,10-year bond at 110 with interest payable on December 31. Thestraight-line method is used to amortize the bond premium.
c. On December 31, the corporation issued a $300,000, 9%, 5-yearbond at 97 with interest payable on December 31 (starting in 2016).The straight-line method is used to amortize the bond discount.
d. Record the necessary adjusting journal entries at December31, 2015 for items âaâ and âbâ.
e. Prepare the liabilities section of the balance sheet as of asof December 31, 2015 for items âaâ and âbâ.
3. Prepare the following independent journal entries.
a. On September 1, 2015 Rushmore Corporation issued a 6-month,12% note in the amount of $20,000. Interest & principal will bepaid when the note matures on February 28, 2016.
i. Journalize the issuance of the note on September 1, 2015.
ii. Journalize the adjusting entry needed at December 31,2015.
iii. Journalize the maturity of the note on February 28,2016.
b. Sold merchandise for cash totaling $422,400, which includes5.6% sales tax on October 6th. Sales tax is remitted tothe state department of revenue every January 1st.
i. Journalize the October 6th sale.
ii. What is the gross profit on this sale if the cost of themerchandise sold was $270,000?
c. During December, the companyâs employees earned wages of$160,000. Withholdings related to these wages were $12,240 forSocial Security (FICA), $13,300 for Federal income tax, and $4,000for state income tax. The company owed no money related to theseearnings for federal or state unemployment tax. Assume the wagesearned during December will be paid in January. No entry has beenmade for wage or payroll tax expense as of December 31.
i. Prepare journal entries to record wage expense & payrollexpense at December 31.
1. On January 1, 2015 James Bond & Company issued 5-yearbonds with a face value of $500,000. The bonds carry a statedinterest rate of 7%. The straight-line method is used to amortizepremiums & discounts.
a. Prepare the journal entry for the issuance assuming the bondsare issued at 97.
i. Was the market interest rate higher or lower than the statedinterest at issue?
ii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on December 31.
iii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on January 1, 2016
b. Prepare the journal entry for the issuance assuming the bondsare issued at 102.
i. Was the market interest rate higher or lower than the statedinterest at issue?
ii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on December 31.
iii. Prepare the adjusting journal entry at December 31, 2015 ifinterest is payable on January 1, 2016.
iv. Prepare the journal entry at maturity assuming that interesthas been accrued and paid.
2. Record journal entries for the following transactionsconcerning current & long-term liabilities at Lubar Corp..
a. On January 1, 2015 the corporation acquired a building bysigning an $800,000, 10%, 5-year mortgage note payable. The termsprovide for yearly installment payments of $211,038 on December31.
b. On January 1, 2015 the corporation issued a $400,000, 11%,10-year bond at 110 with interest payable on December 31. Thestraight-line method is used to amortize the bond premium.
c. On December 31, the corporation issued a $300,000, 9%, 5-yearbond at 97 with interest payable on December 31 (starting in 2016).The straight-line method is used to amortize the bond discount.
d. Record the necessary adjusting journal entries at December31, 2015 for items âaâ and âbâ.
e. Prepare the liabilities section of the balance sheet as of asof December 31, 2015 for items âaâ and âbâ.
3. Prepare the following independent journal entries.
a. On September 1, 2015 Rushmore Corporation issued a 6-month,12% note in the amount of $20,000. Interest & principal will bepaid when the note matures on February 28, 2016.
i. Journalize the issuance of the note on September 1, 2015.
ii. Journalize the adjusting entry needed at December 31,2015.
iii. Journalize the maturity of the note on February 28,2016.
b. Sold merchandise for cash totaling $422,400, which includes5.6% sales tax on October 6th. Sales tax is remitted tothe state department of revenue every January 1st.
i. Journalize the October 6th sale.
ii. What is the gross profit on this sale if the cost of themerchandise sold was $270,000?
c. During December, the companyâs employees earned wages of$160,000. Withholdings related to these wages were $12,240 forSocial Security (FICA), $13,300 for Federal income tax, and $4,000for state income tax. The company owed no money related to theseearnings for federal or state unemployment tax. Assume the wagesearned during December will be paid in January. No entry has beenmade for wage or payroll tax expense as of December 31.
i. Prepare journal entries to record wage expense & payrollexpense at December 31.
Related questions
| There are three problems thisweek. Click the tabs at the bottom of the spreadsheet to accesseach one. | |||||||
| On 1/1/2015, Snickers Company issued 10-year bondswith a face value of $700,000 at 101. The bonds carry a statedinterest rate of 8%, with | |||||||
| interest payable semi-annually on January 1 andJuly 1. Snickers uses the straight-line method of amortizing bondpremium or discount. | |||||||
| (a) Prepare the journal entry to record theissuance of the bonds. | |||||||
| (b) Prepare the journal entry to record payment ofinterest on July 1, 2015. | |||||||
| (c) Prepare the adjusting entry to record theaccrual of interest on December 31, 2015. | |||||||
| (d) Prepare the balance sheet presentation for thebond on 12/31/2015. | |||||||
| (e) Prepare the balance sheet presentation for thebond on 12/31/2016. | |||||||
| Solutions: | |||||||
| Date | Account | Debit | Credit | ||||
| 1/1/2015 | Cash | 707,000 | |||||
| Bonds Payable | 700,000 | ||||||
| Premium on Bonds Payable | 7,000 | ||||||
| 7/1/2015 | Interest Expense | 28,000 | Note that it would also be correct to combine thetwo entries into one. | ||||
| Cash | 28,000 | ||||||
| Premium on Bonds Payable | 350 | ||||||
| Interest Expense | 350 | ||||||
| 12/31/2015 | Interest Expense | 28,000 | Note that it would also be correct to combine thetwo entries into one. | ||||
| Interest Payable | 28,000 | ||||||
| Premium on Bonds Payable | 350 | ||||||
| Interest Expense | 350 | ||||||
| Snickers Corporation | |||||||
| Balance Sheet (Partial) | |||||||
| 12/31/2015 | |||||||
| Long Term Liabilities | |||||||
| Bonds Payable | 700,000 | ||||||
| Add: Premium on Bonds Payable | 6,300 | ||||||
| 706,300 | |||||||
| Snickers Corporation | |||||||
| Balance Sheet (Partial) | |||||||
| 12/31/2016 | |||||||
| Long Term Liabilities | |||||||
| Bonds Payable | 700,000 | ||||||
| Add: Premium on Bonds Payable | 5,600 | ||||||
| 705,600 | |||||||
PAYROLL ENTRIES
J&W Buffet Co. employees earned $350,000 in the week endedDecember 17, 2010. Of this, $26,775 was deducted from employeesâpay for FICA and $62,000 was deducted for income taxes.
Prepare the journal entry to record the employeesâ portion ofpayroll for December 17, 2010.
Prepare the journal entry to record the employerâs share of FICApayroll taxes for December 17, 2010.
HW 9 â 2
NOTES PAYABLE
Mumford Co. borrowed a $100,000 note payable on June 1, 2010,with 6% interest. The note is due on May 31, 2011.
Prepare the journal entry to record the issuance of the note andreceipt of cash on June 1, 2010.
Prepare the adjusting journal entry to record the interest owedat the end of the accounting period on December 31, 2010.
Prepare the journal entries to record the interest and principalpayments to the lender on May 31, 2011.
HW 9 â 3
UNEARNED REVENUE
On January 1, 2009, Charlie Rangel paid $2,000 for a twoâyearmembership to the Beam Gym.
Prepare the journal entry to record the receipt of cash onJanuary 1, 2009.
By December 31, 2009, one half of Rangelâs membership expired.Prepare the required adjusting journal entry on that date.
By December 31, 2010, the remainder of Rangelâs membershipexpired. Prepare the required adjusting journal entry on thatdate.
Post the entries above to the Unearned Revenue account:
| Unearned Revenue |
HW 9 â 4
ISSUING BONDS
Issuance of $800,000, 5-year, 8% payable annually (market rate12%) for cash of $684,627 on 1/1/07
Were these bonds issued at a discount or at a premium? Why?
Prepare the journal entry to record the issuance (sale) of thebonds:
Complete the following interest schedule (assuming straight-lineamortization):
Date | Cash Payment of Interest | Interest Expense | Amortization of Discount | Carrying Value (Net Liability) |
1/1/2007 | None | None | None | |
12/31/2007 | ||||
12/31/2008 | ||||
12/31/2009 | ||||
12/31/2010 | ||||
12/31/2011 |
Prepare the journal entry to record the first payment ofinterest on 12/31/2007:
HW 9 â 5
ISSUING BONDS
Issuance of $1,200,000, 5-year, 10% payable annually (marketrate 8%) for cash of $1,295,844 on 1/1/07
Were these bonds issued at a discount or at a premium? Why?
Prepare the journal entry to record the issuance (sale) of thebonds:
Complete the following interest schedule (assuming straight-lineamortization):
Date | Cash Payment of Interest | Interest Expense | Amortization of Premium | Carrying Value (Net Liability) |
1/1/2007 | None | None | None | |
12/31/2007 | ||||
12/31/2008 | ||||
12/31/2009 | ||||
12/31/2010 | ||||
12/31/2011 |
Prepare the journal entry to record the first payment ofinterest on 12/31/2007:
