Question
In: Accounting
On January 1, 2024, Fabrikam Labs issued 1,000 bonds, each with a face value of $1,000,...
On January 1, 2024, Fabrikam Labs issued 1,000 bonds, each with a face value of $1,000, for 102.7323. The stated interest is 3.8%, and the market rate at the time the bonds were issued was 3.2%. The bonds are due on January 1, 2029 (5 year term) with interest payments due annually every January 1st. The company received cash from the sale of the bonds. Using the effective-interest method calculate and record the December 31, 2025 journal entry for the bond interest expense including premium/discount amortization, and the payable.
Solutions
Expert Solution
| Date | Account Title and Explanation | Debit | Credit |
| December 31.2025 | Bond interest expense | $ 32,710.31 | |
| Premium on bonds payable | $ 5,289.69 | ||
| Interest payable | $ 38,000.00 | ||
| (Interest on bond paid and Discount amortized) |
Alternate solution with zero decimal place in answers
| (Issue of bonds ) | |||
| Date | Account Title and Explanation | Debit | Credit |
| December 31. 2025 | Bond interest expense | $ 32,710 | |
| Premium on bonds payable | $ 5,290 | ||
| Interest payable | $ 38,000 | ||
| (Interest on bond paid and Discount amortized) |
Working
| Amortization table | |||||
| Period | Cash payment | Interest expense | Premium on Bonds payable | Carrying Value of Bond | |
| Issued | $ (27,323.00) | $ 10,27,323.00 | |||
| Year 2024 | $ 38,000.00 | $ 32,874.34 | $ (5,125.66) | $ 10,22,197.34 | |
| year 2025 | $ 38,000.00 | $ 32,710.31 | $ (5,289.69) | $ 10,16,907.65 | |
ekkarill92 answered 2 years agoRelated Solutions
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2020. On the issue date, the market interest rate was 4 percent, so
the total proceeds from the bond issue were $651,410. Surreal uses
the effective-interest bond amortization method and adjusts for any
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Required:
1. Prepare...
On January 1, 2018, Surreal Manufacturing issued 530 bonds, each with a face value of $1,000,...
On January 1, 2018, Surreal Manufacturing issued 530 bonds, each
with a face value of $1,000, a stated interest rate of 3 percent
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2020. On the issue date, the market interest rate was 4 percent, so
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On January 1, 2018, Loop Raceway issued 580 bonds, each with a
face value of $1,000, a stated interest rate of 5 percent paid
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On the issue date, the market interest rate was 6 percent, so the
total proceeds from the bond issue were $564,485. Loop uses the
straight-line bond amortization method and adjusts for any rounding
errors when recording interest in the final year.
Required:
1. Prepare...
On January 1, 2018, Loop Raceway issued 580 bonds, each with a face value of $1,000,...
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On the issue date, the market interest rate was 6 percent, so the
total proceeds from the bond issue were $564,485. Loop uses the
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On January 1, 2018, Surreal Manufacturing issued 600 bonds, each
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Required:
1....
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