Chapter 12: 4TI (page 636)
Herrera Corporation issued a $400,000, 4.5%, 10-year bond payable on January 1, 2018. Journalize the payment of the bond
payable at maturity. (Give the date.)
The bond payable debited and cash account is credited with $400,000 when the payment of the bonds is made.
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Determining the present value of bonds payable
Interest rates determine the present value of future amounts. (Round to the nearest
dollar.)
Requirements
1. Determine the present value of 10-year bonds payable with face value of $86,000
and stated interest rate of 14%, paid semiannually. The market rate of interest is
14% at issuance.
2. Same bonds payable as in Requirement 1, but the market interest rate is 16%.
3. Same bonds payable as in Requirement 1, but the market interest rate is 12%.
Preparing the liabilities section of the balance sheet
Luxury Suites Hotels includes the following selected accounts in its general ledger at
December 31, 2018:
Notes Payable (long-term) \( 200,000 Accounts Payable \) 33,000
Bonds Payable (due 2022) 450,000 Discount on Bonds Payable 13,500
Interest Payable (due next year) 1,000 Salaries Payable 2,600
Estimated Warranty Payable 1,300 Sales Tax Payable 400
Prepare the liabilities section of Luxury Suites’s balance sheet at December 31, 2018.
Preparing an amortization schedule and recording mortgages payable
entries
Kellerman Company purchased a building and land with a fair market value of
\(550,000 (building, \)425,000, and land, \(125,000) on January 1, 2018. Kellerman
signed a 20-year, 6% mortgage payable. Kellerman will make monthly payments of
\)3,940.37. Round to two decimal places. Explanations are not required for journal
entries.
Requirements
1. Journalize the mortgage payable issuance on January 1, 2018.
2. Prepare an amortization schedule for the first two payments.
3. Journalize the first payment on January 31, 2018.
4. Journalize the second payment on February 28, 2018.
Computing the debt to equity ratio
Ludwig Corporation has the following data as of December 31, 2018:
Total Current Liabilities \( 36,210 Total Stockholders’ Equity \) ?
Total Current Assets 58,200 Other Assets 36,800
Long-term Liabilities 139,630 Property, Plant, and Equipment, Net 206,440
Compute the debt to equity ratio at December 31, 2018.
Journalizing bond transactions
Power Company issued a $1,000,000, 5%, 5-year bond payable at face value on
January 1, 2018. Interest is paid semiannually on January 1 and July 1.
Requirements
1. Journalize the issuance of the bond payable on January 1, 2018.
2. Journalize the payment of semiannual interest on July 1, 2018.
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