2. Capital Company issued $600,000, 10%, 20-year bonds on January 1, 2020, at 103. Interest is...

2. Capital Company issued $600,000, 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. The effective interest rate is 8%. Capital uses the straight-line method of amortization and has a calendar year end. Instructions: Prepare all journal entries made in 2020 related to the bond issue.

Expert Solution

Par value of bonds = $600,000

Issue price = 103

Cash received from issue of bonds = Par value of bonds x Issue price

= 600,000 x 103%

= $618,000

Premium on issue of bonds = Cash received from issue of bonds- Par value of bonds

= 618,000-600,000

= $18,000

Semi annual amortization of bonds premium = Bond premium/ Semi annual interest payment periods

= 18,000/40

= $450

Semi annual interest payment = Par value of bonds x Stated interest rate x 6/12

= 600,000 x 10% x 6/12

= $30,000

Date	General Journal	Debit	Credit
January 1, 2020	Cash	$618,000
	Premium on bonds payable		$18,000
	Bonds payable		$600,000
	( To record issuance of bonds)
July 1 , 2020	Interest expense	$29,550
	Premium on bonds payable	$450
	Cash		$30,000
	( To record semi annual interest payment)
December 31, 2022	Interest expense	$29,550
	Premium on bonds payable	$450
	Interest payable		$30,000
	( To record interest expense)

ekkarill92 answered 2 years ago

Harrison Company issued $600,000 of 10%, 20-year bonds on January 1, 2020. Interest is paid semiannually...

Harrison Company issued $600,000 of 10%, 20-year bonds on January 1, 2020. Interest is paid semiannually on July 1 and December 31 each year. Harrison Company uses the straight-line method of amortization for bond premium or discount. B. Assume the bonds are issued at 100. Provide the journal entries for the issuance of the bonds and the first two interest payments. (3 points)

Bramble Company issued $432,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is...

Bramble Company issued $432,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Bramble Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account...

Rico company issued $400,000, 9%, 20 year bonds on january 1, 2017, at 103. Interest is...

Rico company issued $400,000, 9%, 20 year bonds on january 1, 2017, at 103. Interest is payable annually on January 1. Rico uses straight-line amortization for bond premium or discount. Instructions Show WORK Prepare the journal entries to record the following. a) The issuance of the bonds b) The accrual of interest and the premium amortization on december 31, 2017 c) The payment of interest on january 1, 2018 d) The redemption of the bonds at maturity, assuming interest for...

Exercise 14-4 Blue Company issued $576,000 of 10%, 20-year bonds on January 1, 2017, at 103....

Exercise 14-4 Blue Company issued $576,000 of 10%, 20-year bonds on January 1, 2017, at 103. Interest is payable semiannually on July 1 and January 1. Blue Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a)...

Arroyo Company issued $600,000, 10-year, 6% bonds at 103. Instructions (a) Prepare the journal entry to...

Arroyo Company issued $600,000, 10-year, 6% bonds at 103. Instructions (a) Prepare the journal entry to record the sale of these bonds on January 1, 2017. (b) Suppose the remaining Premium on Bonds Payable was $10,800 on December 31, 2020. Show the balance sheet presentation on this date. (c) Explain why the bonds sold at a price above the face amount.

1. On January 1, 201X, Acorn Corporation issued $600,000 of 10%, 20-year bonds for $509,580, yielding...

1. On January 1, 201X, Acorn Corporation issued $600,000 of 10%, 20-year bonds for $509,580, yielding a market rate of 12%. Interest is paid on July 1 and December 31. Acorn uses the interest method to amortize the discount. Tasks: a. Prepare an amortization schedule for the first three semiannual periods. b. Prepare journal entries to record the following: Bond issue on January 1. Semiannual interest payments on July 1 and December 31 as well as amortization of discount. c....

On January 1, 2012, Corporation A issued $18,000,000 of 10% ten-year bonds at 103. The bonds...

On January 1, 2012, Corporation A issued $18,000,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Corporation A at 105. Corporation A has recorded amortization of the bond premium on the straight line method. On December 31, 2018, when the fair value of the bonds was 96, Corporation A repurchased $4,000,000 if the bonds in the open market at 96. Corporation A has recorded interest and amortization for 2018. What amount of gain/loss(ignoring income...

Sandhill Company issued $444,000 of 10%, 20-year bonds on January 1, 2017, at 102. Interest is...

Sandhill Company issued $444,000 of 10%, 20-year bonds on January 1, 2017, at 102. Interest is payable semiannually on July 1 and January 1. Sandhill Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (a)The issuance of the bonds. (b)The payment of interest and related amortization on July 1, 2017. (c)The accrual of interest and the related amortization on December 31, 2017.

On January 1, 2020, Perfection Company issued $400,000 of 10%, 6-year bonds dated January 1, 2020,...

On January 1, 2020, Perfection Company issued $400,000 of 10%, 6-year bonds dated January 1, 2020, with interest payments every June 30 and December 31. The bonds were issued at $382,762 when the market rate was 11%. Perfection Company amortizes any premium or discount using the EFFECTIVE-INTEREST-RATE method. Round all numbers to the nearest whole number. 1-Using proper formatting (eliminating the date), prepare the journal entry on January 1, 2020 to record the issuance of the bonds. 2-Using proper formatting...

. The Stylist Company issued 20-year bonds on January 1. The 10% bonds have a face...

. The Stylist Company issued 20-year bonds on January 1. The 10% bonds have a face value of $900,000 and pay interest every January 1 and July 1. The bonds were sold for $982,808 based on the market interest rate of 9%. Stylist uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Stylist should record which of the following journal entries when the interest is paid. (round to the nearest dollar)...

Question