Question

In: Accounting

On January 1, 2021, Universe of Fun issues $900,000, 8% bonds that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 9%, and the bonds issue for $841,464. Interest is paid semiannually on June 30 and December 31.

On January 1, 2021, Universe of Fun issues $900,000, 8% bonds that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 9%, and the bonds issue for $841,464. Interest is paid semiannually on June 30 and December 31.

 

Required:

1. Complete the first three rows of an amortization schedule.

2. Record the issuance of the bonds on January 1, 2021.

3. Record the interest payments on June 30, 2021, and December 31, 2021.

Solutions

Expert Solution

1) Amortization table

Date Interest expense Interest paid Amortization Carrying value
Jan 1       841464
June 30 841464×9%×6/12 = 37866 36000 1866 843330
Dec 31 37950 36000 1950 845280
         

 

2) Journal entry

Date General Journal Debit Credit
Jan 1 Cash 841464  
  Discount on bonds payable 58536  
  Bonds payable   900000

 

3) Journal entry

Date General Journal Debit Credit
June 30 Interest expense 37866  
  Cash   36000
  Discount on bonds payable   1866
       
Dec 31 Interest expense 37950  
  Cash   36000
  Discount on bonds payable   1950

1) Amortization table

Date Interest expense Interest paid Amortization Carrying value
Jan 1       841464
June 30 841464×9%×6/12 = 37866 36000 1866 843330
Dec 31 37950 36000 1950 845280
         

 

Junaid answered 2 years ago
Next > < Previous

Related Solutions

On January 1, 2021, Universe of Fun issues $700,000, 7% bonds that mature in 10 years....
On January 1, 2021, Universe of Fun issues $700,000, 7% bonds that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 8%, and the bonds issue for $652,434. Interest is paid semiannually on June 30 and December 31. Record the issuance of the bonds on January 1, the interest payments on June 30, and December 31, 2021. 1) Record the bond issue. 2) Record the first semiannual interest payment. 3) Record the second...
On January 1, 2021, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.
On January 1, 2021, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.   Required: Assuming the market interest rate on the issue date is 7%, the bonds will issue at $600,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021.    
On January 1, 2021, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.
On January 1, 2021, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.   Required: Assuming the market interest rate on the issue date is 6%, the bonds will issue at $644,632. 1. Complete the first three rows of an amortization schedule. 2. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021....
Bushman, Inc., issues $400,000 of 9% bonds that pay interest semiannually and mature in 10 years....
Bushman, Inc., issues $400,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is: a. 6% per year compounded semiannually. (Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.) Present value of principal repayment $Answer Present value of interest payments $Answer Selling price of bonds $Answer b. 8% per year compounded semiannually. (Use a calculator or Excel for your calculations....
Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December...
Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December 31. The bonds have a $31,000 par value and an annual contract rate of 12%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Required: Consider each separate situation. 1. The market rate at the...
Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December...
Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December 31. The bonds have a $40,000 par value and an annual contract rate of 10%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations. Round your "Present Value" answers to the nearest whole dollar amount.)...
Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December...
Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December 31. The bonds have a $39,000 par value and an annual contract rate of 8%, and they mature in 10 years. Required: Consider each of the following three separate situations. 1. The market rate at the date of issuance is 6%. (a) Complete the below table to determine the bonds' issue price on January 1. (b) Prepare the journal entry to record their issuance....
Jones Inc. issues $5,000,000 of 5% bonds that pay interest semiannually and mature in 10 years....
Jones Inc. issues $5,000,000 of 5% bonds that pay interest semiannually and mature in 10 years. Compute the bonds’ issue price and write down the corresponding journal entries assuming that the bonds’ effective interest rate is: 1) 4% per year market rate semiannually and please tell whether the bond is issued at a premium or discount. Please write down the appropriate journal entries for this discount or premium. 2) 6% per year market rate semiannually and please tell whether the...
10-1a Hartford Research issues bonds dated January 1, 2017, that pay interest semiannually on June 30...
10-1a Hartford Research issues bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds have a $34,000 par value and an annual contract rate of 8%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Required: Consider each of the following three separate situations....
Flagstaff Systems issues bonds dated January 1, 2017, that pay interest semiannually on June 30 and...
Flagstaff Systems issues bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds have a $90,000 par value and an annual contract rate of 12%, and they mature in five years. Required For each of the following three separate situations, (a) determine the bonds’ issue price on January 1, 2017, and (b) prepare the journal entry to record their issuance. 1. The market rate at the date of issuance is 10%. 2. The...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT