Question

Face Value $100,000

Coupon rate: 10%

Issue date: january 1, 2012

Maturity date: December 31,2016

Interest dates: june 30 & december 31

Prepare all journal entries though december 31 ,2013 for each scenario:

a) Bond sold to yield 10%

b) bond sold to yield 12%

c) bond sold to yield 12% and called for 102 on december 31, 2013. there is $1,000 in reacquisition expense.

d) bond sold to yield 10% on march 1, 2012

e) bond sold to yield 12% on march 1, 2012

f) bond sold to yield 8%

Answer 1

			Debit	Credit		W.N
a)	06/30/2013	Bond Interest Expense	5000			=100000*10%/2
		Cash		5000
		(To record semiannual interest payment)
a)	12/31/2013	Bond Interest Expense	5000			=100000*10%/2
		Cash		5000
		(To record semiannual interest payment)
b)	06/30/2013	Bond Interest Expense	6000			=100000*12%/2
		Cash		6000
		(To record semiannual interest payment)
b)	12/31/2013	Bond Interest Expense	6000			=100000*12%/2
		Cash		6000
		(To record semiannual interest payment)
c)	06/30/2013	Bond Interest Expense	6000			=100000*12%/2
		Cash		6000
		(To record semiannual interest payment)
c)	12/31/2013	Bond Interest Expense	6000			=100000*12%/2
		Bonds Payable	100000
		Loss on reacquisition of Bonds	3000			=2000+1000
		Cash		109000		=102000+6000+1000
		(To record semiannual interest payment & bond called)
e)	06/30/2013	Bond Interest Expense	3333			=100000*10%*4/12
		Cash		3333
		(To record semiannual interest payment)
e)	12/31/2013	Bond Interest Expense	5000			=100000*10%/2
		Cash		5000
		(To record semiannual interest payment)
f)	06/30/2013	Bond Interest Expense	4000			=100000*12%*4/12
		Cash		4000
		(To record semiannual interest payment)
f)	12/31/2013	Bond Interest Expense	6000			=100000*12%/2
		Cash		6000
		(To record semiannual interest payment)
g)	06/30/2013	Bond Interest Expense	4000			=100000*8%/2
		Cash		4000
		(To record semiannual interest payment)
g)	12/31/2013	Bond Interest Expense	4000			=100000*8%/2
		Cash		4000
		(To record semiannual interest payment)