In: Accounting
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?
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.