Entries for issuing bonds and amortizing premium by straight-line methodSmiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010. Interest is payablesemiannually on April 1 and October 1.a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank.b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for 6 months, using the straight-line method. If an amount box does not require an entry, leave it blank.c. Why was the company able to issue the bonds for $20,811,010 rather than for the face amount of $20,000,000?The market rate of interest isthe contract rate of interest.

Journal entries refer to the recording of the business activities into the books of accounts or into…

Answered: for issuing bonds and amortizing…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

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Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...

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Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of discount D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of discount
Edward Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable semiannually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of discount
Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received $540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
BONDS ISSUED AT FACE VALUE Ramona Arroyo Co. issued the following bonds: REQUIRED Prepare journal entries for: (a) Issuance of the bonds. (b) Interest payment on the bonds on September 30, 20-1. (c) Year-end adjustment on the bonds for 20-1. (d) Reversing entry for the beginning of 20-2. (e) Interest payments on the bonds for 20-2 (March 31 and September 30). (f) Redemption at maturity.
BONDS ISSUED AT FACE VALUE Ito Co. issued the following bonds REQUIRED Prepare journal entries for: (a) Issuance of the bonds. (b) Interest payment on the bonds on September 30, 20-1. (c) Year-end adjustment on the bonds for 20-1. (d) Reversing entry for the beginning of 20-2. (e) Interest payments on the bonds for 20-2 (March 31 and September 30). (f) Redemption at maturity.
BONDS ISSUED AT FACE VALUE WITH SINKING FUND Martin Manufacturing issued the following bonds: REQUIRED Prepare journal entries for: (a) Issuance of the bonds. (b) Deposit to sinking fund on June 1. (c) Interest payment on the bonds on September 30, 20-1. (d) Earnings of 2,400 on the sinking fund in 20-1. (e) Year-end adjustment on the bonds for 20-1. (f) Reversing entry for the beginning of 20-2. (g) Interest payment on the bonds on March 31, 20-2. (h) Deposit to sinking fund on June 1, 20-2. (i) Redemption at maturity from the sinking fund. (j) Return of excess cash of 1,050 from the sinking fund to the corporation.

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