Question

On July 1, 2017, Global Satellites Corporation issued $1,800,000 of 10-year, 8% bonds to yield a market interest rate of 7%. The bonds pay semi-annual interest on July 1 and January 1. Global has a December 31 year end. When the bonds were issued, Global received $1,927,919

Click here to view the factor table.

Part 1

Prepare an amortization table through January 1, 2019 (three interest periods) for this bond issue. (Round all amounts to the nearest dollar, e.g. 5,275.)

GLOBAL SATELLITES CORPORATION Bond Premium Amortization
Semi-annual interest periods	Interest to be paid	Interest Expense to be Recorded	Premium Amortization	Unamortized Premium	Bond Carrying Amount
July 1/17				$enter a dollar amount rounded to the nearest whole	$enter a dollar amount rounded to the nearest whole
Jan. 1/18	$enter a dollar amount rounded to the nearest whole	$enter a dollar amount rounded to the nearest whole	$enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole
July 1/18	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole
Jan. 1/19	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole
July 1/19	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole	enter a dollar amount rounded to the nearest whole

Part 2

Record the issue of the bonds on July 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round all amounts to the nearest dollar, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
2017
July 1	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

Part 3

Prepare the adjusting entry on December 31, 2018, to accrue the interest on the bonds. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round all amounts to the nearest dollar, e.g. 5,272.)

Date	Account Titles and Explanation	Debit	Credit
2018
Dec. 31	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount

Part 4

Show the statement of financial position presentation of the liabilities at December 31, 2018. (Round all amounts to the nearest dollar, e.g. 5,275.)

GLOBAL SATELLITES CORPORATION Statement of Financial Position (Partial) December 31, 2018
Current liabilities
enter an account title		$enter a dollar amount
Non-current liabilities
enter an account title		enter a dollar amount

Part 5

Record the payment of interest on January 1, 2019. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round all amounts to the nearest dollar, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
2019
Jan. 1	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

Part 6

Prove the issue proceeds of the bonds on July 1, 2017, by calculating the present value of the bonds at that time. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answer to the nearest dollar, e.g. 5,275.)

The bonds’ present value (issue price)

$enter the bonds’ present value in dollars rounded to the nearest whole

Answer 1

1	Semi-annual interest periods	Interest to be paid	Interest Expense to be Recorded	Premium Amortization	Unamortized Premium	Carrying Value
	July 1/17				127,919	1,927,919
	Jan. 1/18	72,000	67,477	4,523	123,396	1,923,396
	July 1/18	72,000	67,319	4,681	118,715	1,918,715
	Jan. 1/19	72,000	67,155	4,845	113,870	1,913,870
	July 1/19	72,000	66,985	5,015	108,856	1,908,856
2	Date	Account Titles and Explanation	Debit	Credit
	2017
	July 1	Cash	1,927,919
		Bonds Payable		1,800,000
		Premium on Bonds Payable		127,919
3	2018
	Dec 31	Interest Expense	67,155
		Premium on Bonds Payable	4,845
		Interest Payable		72,000
4		GLOBAL SATELLITES CORPORATION
		Statement of Financial Position (Partial)
		December 31, 2018
		Current liabilities
		Interest Payable		72,000
		Non-current liabilities
		Bonds Payable	1,913,870
		Less: Premium on Bonds Payable	113,870	1,800,000