Chapter 12: Q8RQ (page 654)
When a bond is issued, what is its present value?
The long term-debt is a debt that is not due in one year.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Journalizing bond issuance and interest payments
On June 30, Parker Company issued 11%, five-year bonds payable with a face value
of $120,000. The bonds are issued at face value and pay interest on June 30 and
December 31.
Requirements
1. Journalize the issuance of the bonds on June 30.
2. Journalize the semiannual interest payment on December 31
Determining the present value of bonds payable and journalizing
using the effective-interest amortization method
Brad Nelson, Inc. issued $600,000 of 7%, six-year bonds payable on January 1, 2018.
The market interest rate at the date of issuance was 6%, and the bonds pay interest
semiannually.
Requirements
1. How much cash did the company receive upon issuance of the bonds payable?(Round to the nearest dollar.)
2. Prepare an amortization table for the bond using the effective-interest method,through the first two interest payments (Round to the nearest dollar.)
3. Journalize the issuance of the bonds on January 1, 2018, and the first and secondpayments of the semiannual interest amount and amortization of the bonds onJune 30, 2018, and December 31, 2018. Explanations are not required.
Determining the present value of bonds payable and journalizing using the effective-interest amortization method
Ari Goldstein issued $300,000 of 11%, five-year bonds payable on January 1, 2018. The market interest rate at the date of issuance was 10%, and the bonds pay interest semiannually.
Requirements
1. How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.)
2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments. (Round to the nearest dollar.)
3. Journalize the issuance of the bonds on January 1, 2018, and the first second payments of the semiannual interest amount and amortization of the bonds on June 30, 2018, and December 31, 2018. Explanations are not required.
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.
Journalizing liability transactions and reporting them on the balance
sheet
The following transactions of Johnson Pharmacies occurred during 2018 and 2019:
2018
Mar. 1 Borrowed \(450,000 from Coconut Creek Bank. The 15-year, 5% note requires
payments due annually, on March 1. Each payment consists of \)30,000 principal
plus one year’s interest.
Dec. 1 Mortgaged the warehouse for \(250,000 cash with Saputo Bank. The mortgage
requires monthly payments of \)8,000. The interest rate on the note is 12% and
accrues monthly. The first payment is due on January 1, 2019.
31 Recorded interest accrued on the Saputo Bank note.
31 Recorded interest accrued on the Coconut Creek Bank note.
2019
Jan. 1 Paid Saputo Bank monthly mortgage payment.
Feb. 1 Paid Saputo Bank monthly mortgage payment.
Mar. 1 Paid Saputo Bank monthly mortgage payment.
1 Paid first installment on note due to Coconut Creek Bank.
Requirements
1. Journalize the transactions in the Johnson Pharmacies general journal. Round to
the nearest dollar. Explanations are not required.
2. Prepare the liabilities section of the balance sheet for Johnson Pharmacies on
March 1, 2019 after all the journal entries are recorded.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
