Question

In: Accounting

This assignment will take some time so please don’t wait till the last minute to do...

This assignment will take some time so please don’t wait till the last minute to do it.

On July 1, 2017, Bobby's Building Corp. issued $1,000,000 of 10% bonds dated July 1, 2017 for $937,229. The bonds were sold to yield 11% and pay interest semiannually on July 1 and January 1. Bobby's Building Corp. uses the effective interest method of amortization. The company's fiscal year ends on February 28.

Required :

1.   Prepare the journal entry on July 1, 2017.

2.   Prepare the amortization table for the first two interest periods.

3.   Prepare the journal entry on January 1, 2018.

4.   Prepare the adjusting entry needed on February 28, 2018.

Round all amounts to the nearest dollar. Omit explanations for all journal entries.

Solutions

Expert Solution

Solution:

1) journal entry on July 1, 2017.

Date

Account Titles and Explanation

Debit

Credit

July.1, 2017

Cash

$937,229

Discount on Bonds Payable (bal.fig)

$62,771

Bonds Payable

$1,000,000

2) amortization table for the first two interest periods.

Schedule of Amortization of Bond DISCOUNT (Effective Rate Method)

Payment intervals

Date

Interest Expense (Carrying Value at the beginning of period x Market Interest Rate 11% * 1/2half yearly)

Cash Paid (Face Value of the Bonds $1,000,000 x Coupon Rate 10% * 1/2 half yearly)

Discount Amortization (Interest Expense - Cash Paid)

Unamortized Bond Discount

Par Value of Bonds Payable

Book Value (Par Value - Balance of Unamortized Bond Discount)

0

July.1, 2017

$62,771

$1,000,000

$937,229

1

Jan.1, 2018

$51,548

$50,000

$1,548

$61,223

$1,000,000

$938,777

2

July.1, 2018

$51,633

$50,000

$1,633

$59,591

$1,000,000

$940,409

3) journal entry on January 1, 2018

Date

Account Titles and Explanation

Debit

Credit

Jan.1, 2018

Interest Expense

$51,548

Interest Payable

$50,000

Discount on Bonds Payable (Amortization)

$1,548

4) adjusting entry needed on February 28, 2018

For Adjustment entry we need to calculate the 2 months expense by referring the amortization table part 2

2 Months Interest Expense = $51,633*2/6 = $17,211

2 months Coupon Interest Payable = $50,000*2/6 = $16,667

2 months Discount Amortization = 17,211 – 16,667 = $544

Date

Account Titles and Explanation

Debit

Credit

Feb.28, 2018

Interest Expense

$17,211

Interest Payable

$16,667

Discount on Bonds Payable (Amortization)

$544

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you


Related Solutions

Take a 20-minute walk or ride (or do anything that involves some movement) and think about...
Take a 20-minute walk or ride (or do anything that involves some movement) and think about the organ systems described in the lecture. Take a break from your activity, and note the following: • Name 4 organ systems that you feel are working during your activity. • What roles are 2 of these systems playing in your activity? • What is one system that you know is working but you’re not feeling it work? • Name 1 way that your...
Many real estate investors wait until the very last minute to pay their taxes, even though...
Many real estate investors wait until the very last minute to pay their taxes, even though they are hit with interest and sometimes late penalties. Why do you think these businessmen/women willingly do this?
PLEASE DO NOT ANSWER THIS IF YOU DO NOT KNOW IT. Last time I posted, someone...
PLEASE DO NOT ANSWER THIS IF YOU DO NOT KNOW IT. Last time I posted, someone literally copied and pasted from an article and it was very difficult to understand. 1) What is meant by Factoring of Accounts Receivables? 2) List 3 advantages of Factoring 3) List 3 disadvantages of Factoring 4) List 3 Factors in the USA. 5) If you are a company that factors your receivables, would you prefer "recourse" or "non-recourse" factoring? Explain your choice.
Each time May Nursery hires a new employee, it must wait for some period of time...
Each time May Nursery hires a new employee, it must wait for some period of time before the employee can meet production standards. Management is unsure of the learning curve in its operations but it knows the first job by a new employee averages 40 hours and the second job averages 35 hours. Assume all jobs to be equal in size. Required: a.       What is the learning-curve percentage, assuming the cumulative average-time method? b.      What is the learning-curve percentage, assuming the incremental...
At what time past 6:00 do the minute and hour hands overlap? Please show work.
At what time past 6:00 do the minute and hour hands overlap? Please show work.
There is no extra information needed to solve this question so please don’t ask for extra...
There is no extra information needed to solve this question so please don’t ask for extra information. Thanks
This is Physics 2, College Level: Someone answered wrong so take your time, do not rush...
This is Physics 2, College Level: Someone answered wrong so take your time, do not rush to answer these questions. Explain how you got the answers. A 1.00 F capacitor is charged to 6.00 V. The capacitor and an open switch is connected to a coil of wire that consists of 500 windings, which has a resistance of 1.20 Ω. This coil has a diameter of 5.00 cm and a length of 16.0 cm. A slightly smaller coil is placed...
Take some time to research the many hazards that you will face as you take care...
Take some time to research the many hazards that you will face as you take care of your patient. Describe one hazard that could harm you and/or you patient in the healthcare setting. What actions can nurses take to prevent harm to your patient or self?
Take some time to research the many hazards that you will face as you take care...
Take some time to research the many hazards that you will face as you take care of your patient. Describe one hazard that could harm you and/or you patient in the healthcare setting. What actions can nurses take to prevent harm to your patient or self?
Take some time to research the many hazards that you will face as you take care...
Take some time to research the many hazards that you will face as you take care of your patient. Describe one hazard that could harm you and/or your patient in the healthcare setting. What actions can nurses take to prevent harm to your patient or self? Remember that your posts must exhibit appropriate writing mechanics including using proper language, cordiality, and proper grammar and punctuation. If you refer to any outside sources or reference materials be sure to provide proper...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT