Question

Tableau DA 10-2: Exercise, Recording bond issuance and amortization LO P2

The founder of Frenza asks us to assist her in accounting and analysis of the corporation’s bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations for her business decisions.

1(a). Prepare journal entries to record the issuance of Frenza bonds on January 1, Year 1.
1(b). Prepare journal entries to record the first and second interest payments on June 30, Year 1, and December 31, Year 1.
1(c). Prepare journal entries to record the maturity of the bonds on December 31, Year 3.
2. Frenza needs to raise money to purchase new equipment. The founder is concerned about losing ownership control of her company. Which of the following ways to raise money would we recommend?
3. Frenza needs to raise money to purchase more inventory. The founder is concerned about the company’s ability to make required cash payments when cash flows are low. Which of the following ways to raise money would we recommend?

Answer 1

Since data was not given, i had data to solve, if there is some difference in data kindly comment

1(a)

Date	Account Titles	Debit	Credit
Jan-01	Cash	$            88,000
Year 1	Discount on Bonds Payable	$            12,000
	Bonds Payable		$          100,000

1(b)

Date	Account Titles	Debit	Credit
Jun-30	Interest Expense	$              6,000
Year 1	Cash		$              4,000
	Discount on Bonds Payable		$              2,000
Dec-31	Interest Expense	$              6,000
Year 1	Cash		$              4,000
	Discount on Bonds Payable		$              2,000

1(c)

Date	Account Titles	Debit	Credit
Dec-31	Bonds Payable	$          100,000
Year 3	Cash		$          100,000

2.
Issue Bonds
Issue Note to a bank
Since these methods of raising finance will not dilute ownership

3.
Issue Common Stock
Issue Preferred Stock
Since these doesnot required fixed cash payments.