Question

Using 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 $9,000,000 face value bonds, dated 1/1/16, with a coupon rate (aka: stated rate) of 7%. The market rate of interest on the date the bonds were issued was 5% (Interest is paid semiannually on 6/30 and 12/31. The bonds have a 5-year life, with principal due on 12/31/20. Use the “effective interest method” of amortizing any Bond Discount or Bond Premium. (Do NOT use straight-line amortization!) ROUND ALL AMOUNTS TO THE NEAREST WHOLE DOLLAR!
BIGDEBT's fiscal year is the calendar year.
1. Compute the cash received from the issue on 1/1/16:
ANSWER:____________
COMPUTATIONS:
2. 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
3. Prepare and attach an amortization schedule for the entire five-year life (ten semi-annual interest periods) of the bonds. Put schedule on a separate sheet and attach to last page.
4. Prepare the journal entry to record the 6/30/16 interest payment and any discount/premium amortization.
		ACCOUNTS	DEBIT	CREDIT
5. Prepare the journal entry to record the 12/31/17 interest payment and any discount/premium amortization. (NOTE THE DATE!!)
		ACCOUNTS	DEBIT	CREDIT

Answer 1