Login Registrieren

Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 12: Q25E_4 (page 661)

Journalizing bond issuance and interest payments
On January 1, 2018, Roberts Unlimited issues 8%, 20-year bonds payable with a
face value of $240,000. The bonds are issued at 104 and pay interest on June 30 and
December 31.
Requirements
1. Journalize the issuance of the bonds on January 1, 2018.
2. Journalize the semiannual interest payment and amortization of bond premium on
June 30, 2018.
3. Journalize the semiannual interest payment and amortization of bond premium on
December 31, 2018.
4. Journalize the retirement of the bond at maturity, assuming the last interest payment
has already been recorded. (Give the date).

Short Answer

Expert verified

The bonds payable account is debited with $240,000, and the cash account is credited with $240,000.

Step by step solution

01

Definition of bonds issue on premium

When the bonds are issued greater than the market interest rate, then the bonds are known as the bond issue on premium.

02

Journal entry for the retirement

Date	Particulars	Debit	Credit
January 1, 2038	8% Bonds Payable	$240,000
	Cash		$240,000
	(To record the retirement of the bond)

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Determining future value

David is entering high school and is determined to save money for college. David feels

he can save $5,000 each year for the next four years from his part-time job. If David is

able to invest at 6%, how much will he have when he starts college?

Analyzing and journalizing bond transactions

On January 1, 2018, Nurses Credit Union (NCU) issued 8%, 20-year bonds payablewith face value of $600,000. The bonds pay interest on June 30 and December 31.

Requirements

1. If the market interest rate is 7% when NCU issues its bonds, will the bonds bepriced at face value, at a premium, or at a discount? Explain.

2. If the market interest rate is 9% when NCU issues its bonds, will the bonds bepriced at face value, at a premium, or at a discount? Explain.

3. The issue price of the bonds is 92. Journalize the following bond transactions:

a. Issuance of the bonds on January 1, 2018.

b. Payment of interest and amortization on June 30, 2018.

c. Payment of interest and amortization on December 31, 2018.

d. Retirement of the bond at maturity on December 31, 2037, assuming the lastinterest payment has already beenrecorded.

Analyzing, journalizing, and reporting bond transactions

Johnny’s Hamburgers issued 8%, 10-year bonds payable at 85 on December 31, 2018.

At December 31, 2020, Johnny reported the bonds payable as follows:

Long-term Liabilities:

Bonds Payable \( 300,000

Less: Discount on Bonds Payable (36,000) \) 264,000

Johnny pays semiannual interest each June 30 and December 31.

Requirements

1.Answer the following questions about Johnny’s bonds payable:

a.What is the maturity value of the bonds?

b.What is the carrying amount of the bonds at December 31, 2020?

c.What is the semiannual cash interest payment on the bonds?

d.How much interest expense should the company record each year?

2. Record the June 30, 2020, semiannual interest payment and amortization of discount.

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.

Explain each of the key factors that the time value of money depends on.

See all solutions

Recommended explanations on Business Studies Textbooks

Introduction to Business

Read Explanation

Business Operations

Read Explanation

Public Relations Business Studies

Read Explanation

Strategy

Read Explanation

Insurance

Read Explanation

Startups

Read Explanation

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free