Question

		Please use the following reference to answer the questions: Accounting Standards Codification 470 (Subtopic 50; Section 40; Subsection 2) (formerly: FASB Statement No. 145, Rescission of FASB Statements No.4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, par. 6.) On 1/1/16, BIGDEBT issued $12,000,000 face value bonds, dated 1/1/16, with a coupon rate of 10% for a price of $11,116,790. Interest is paid semiannually on 6/30 and 12/31. The bonds have a 5-year life, with principal due on 12/31/20. The bonds are callable (redeemable) by BIGDEBT at any time at a price of 1.07 (or $1,070 per $1,000 bond). Compute the annual market interest rate (i.e., what was the market rate of interest on Jan. 1, 2016--the date the bonds were issued.)
ANSWER_______________
		COMPUTATIONS
9. Prepare the journal entry to record the issuance on 1/1/16. (If there is a Discount or Premium, show it in a separate account in your journal entry):
		ACCOUNTS	DEBIT	CREDIT

10. Prepare and attach an amortization schedule in EXCEL to cover the life of the bonds. Put schedule on a separate sheet and attach to last page.
11. Prepare the journal entry to record the 6/30/16 interest payment and discount/premium amortization.
		ACCOUNTS	DEBIT	CREDIT
12. Prepare the journal entry to record the 12/31/17 interest payment. (WATCH THE DATE)
		ACCOUNTS	DEBIT	CREDIT

13. Assume on 1/1/18 that BIGDEBT has decided to refinance its debt. Assume all the

data about the bond issue (as given in Requirement #8 above).

On 1/1/18 BIGDEBT issues sufficient new bonds to call in the old bonds. The dollar amount (price) of the new bond issue is exactly the same as the dollar amount needed to call (redeem) the old bonds. The new bond issue has a 14% coupon rate, 3-year life, and the new bonds are issued at face with interest payments on each 6/30 and 12/31.

		(1) Present the journal entry to record the sale of the new bonds on Jan. 1, 2018.
		ACCOUNTS	DEBIT	CREDIT
		(2) Give the journal entry to record the retirement of the old bonds on Jan 1, 2018.
		ACCOUNTS	DEBIT	CREDIT

Answer 1