White Company issued P 8,000,000 12% bonds on December 31, 2020 at 96. Interest is payable annually on December 31. Bond maturity: December 31 1,000,000 1,000,000 1,000,000 1,000,000 2,000,000 2,000,000 8,000,000 2022 2023 2024 2025 2026 2027 Required: (1) Prepare a schedule showing the annual amortization of the bond discount using bond outstanding method. (2) Prepare journal entries from 2020 to 2023.

White Company issued P 8,000,000 12% bonds on December 31, 2020 at 96. Interest is payable annually on December 31. Bond maturity: December 31 1,000,000 1,000,000 1,000,000 1,000,000 2,000,000 2,000,000 8,000,000 2022 2023 2024 2025 2026 2027 Required: (1) Prepare a schedule showing the annual amortization of the bond discount using bond outstanding method. (2) Prepare journal entries from 2020 to 2023.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 6PA: Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...

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Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
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