Burr Motor Company, a manufacturer of small- to medium-sized electric motors, needs additional funds to market a revolutionary new motor. Burr hasarranged for private placement of a $50,000, 5-year, 11% bond issue. Interest on these bonds is paid annually each year on August 31. The issue wasdated and sold on September 1, 2018, for proceeds of $48,197.61 to yield 12%. Burr Motor Company has December 31 fiscal year-end.Required:1. Prepare a bond interest expense and discount amortization schedule showing interest expense for each interest period using the effectiveinterest method.2. Prepare journal entries to record the issuance of the bonds and the interest entries for 2019 and 2020 using (a) the effective interest methodand (b) the straight-line method.

Bonds : Bonds are types of financial instruments which are issued by corporations or government to…

Answered: Burr Motor Company, a manufacturer of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 11E

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Burr Motor Company, a manufacturer of small- to medium-sized electric motors, needs additional funds to market a revolutionary new motor. Burr has arranged for private placement of a $50,000, 5-year, 11% bond issue. Interest on these bonds is paid annually each year on August 31. The issue was dated and sold on September 1, 2018, for proceeds of $48,197.61 to yield 12%. Burr Motor Company has December 31 fiscal year-end. Required: 1. Prepare a bond interest expense and discount amortization schedule showing interest expense for each interest period using the effective interest method. 2. Prepare journal entries to record the issuance of the bonds and the interest entries for 2019 and 2020 using (a) the effective interest method and (b) the straight-line method.
Burr Motor Company, a manufacturer of small- to medium-sized electric motors, needs additional funds to market a revolutionary new motor. Burr has arranged for private placement of a $50,000, 5-year, 11% bond issue. Interest on these bonds is paid annually each year on August 31. The issue was dated and sold on September 1, 2018, for proceeds of $48,197.61 to yield 12%. Burr Motor Company has December 31 fiscal year-end. Prepare journal entries to record the issurance of the bonds and the interest entries for 2019 and 2020 using a) the effective interest method and b) the straight-line method. Prepare journal entries to record the issuance of the bonds and the interest entries for 2019 and 2020 using (a) the effective interest method and (b) the straight-line method.
Cheyenne Co. is building a new hockey arena at a cost of $2,460,000. It received a downpayment of $500,000 from local businesses to support the project and now needs to borrow $1,960,000 to complete the project. It therefore decides to issue $1,960,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 9%. Collapse question part(a) Correct answer. Your answer is correct.Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) DateAccount Titles and ExplanationDebitCreditJanuary 1, 2019Entry field with correct answerCashEntry field with correct answer2,085,786Entry…
Cheyenne Co. is building a new hockey arena at a cost of $2,360,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $1.860,000 to complete the project. It therefore decides to issue $1,860.000 of 10%, 10-year bonds. These bonds were issued on January 1.2019, and pay interest annually on each January 1 The bonds yield 9%. (a) Your answer is partially correct. Prepare the journal entry to record the issuance of the bonds on January 1. 2019. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to O decimal places eg. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit January 1, 2019 Cash 1978482 Bonds Payable 1860000 118482 Premium on Bonds Payable
Kirpalani Limited wants to expand its furniture line. The board of directors have agreed that the fastest way to raise these funds is to issue bonds. The company proceeds to issue $600,000, 10% bonds on March 1st, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. The company closes its books on December 31.1. Calculate the proceeds from the sale of the bond. Clearly show the amount of the premium or discount and state two reasons which support the premium or discount calculated. 2. Prepare a bond amortization schedule for the bond’s life3. Prepare all the journal entries for 2020 & 2021 (b) Gassy Stores sells $400,000 of 12% bonds on June 1, 2022. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2026. The market rate of similar investments is 10%. On December 1, 2024, Gassy Stores retired the bond for $400,000. The company closes its books on December 31.I. Calculate the…
Kirpalani Limited wants to expand its furniture line. The board of directors have agreed that the fastest way to raise these funds is to issue bonds. The company proceeds to issue $600,000, 10% bonds on March 1st, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. The company closes its books on December 31. Calculate the proceeds from the sale of the bond. Clearly show the amount of the premium or discount and state two reasons which support the premium or discount calculated. Prepare a bond amortization schedule for the bond's life Prepare all the journal entries for 2020 & 2021
Ardvark plans to raise the capital by issuing $210,000 of 7.5%, six-year bonds on January 2, 2020. The bonds pay interest semiannually on June 30 and December 31. The market rate is 8%. The company receives $208,476 when the bonds are issued.The company also issues a mortgage payable for $450,000 on January 2, 2020. The proceeds from the mortgage will be used to construct the new building. The mortgage requires annual payments of $45,000 plus interest for ten years, payable on December 31. The mortgage interest rate is 8%. 1) Will the bonds issue at face value, a premium, or a discoutn? 2) Record teh following transactions. Include dates and round to the nearest dollar. Omit explainations. 2a) Cash recevied from the bond issue. 2b) Cash received from the mortgage payable. 2c) Semiannual bond interest payments for 2020. Amortize the premium or discount using the straight-line amortization method. 2d) Payment on the mortgage payable for 2020. 2e) Retirement of bond at maturity on…
Mi-T-M Corporation is a leading designer and manufacturer of high quality industrial equipment. Mi-T- M Corporation issues $500,000 of 7% bonds on January 1, 2021 to finance operations. The bonds are due in 20 years. Interest is paid semiannually on June 30 and December 31. Required: 1. If the market interest rate is 7%, the bonds will issue at $500,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet < 1 2 3 Record the second semiannual interest payment. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021
On the last day of its fiscal year ending December 31, 2020, the Lynbrook Inc. completed four financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. a. Lynbrook issued 7% stated rate bonds with a face amount of $500,000. The bonds mature on December 31, 2030 (10 years). The market rate of interest for similar bond issues was 10%. Interest is paid quarterly beginning on March 31, 2021. b. The company leased three manufacturing facilities. Lease 1 requires 15 annual lease payments of $100,000 beginning on December 31, 2020. Lease 2 requires 10 semi-annual lease payments of $25,000 beginning on June 30, 2021. Lease 3 requires the first of 6 payments of $35,000 to be deferred for 4 years. Accounting standards require the three leases to be recorded as liabilities for the present value of the scheduled payments. Assume that an annual 8% interest rate properly reflects the time value of money for the lease obligations. Required:…
Splish Co. is building a new hockey arena at a cost of $2,660,000. It received a downpayment of $450,000 from local businesses to support the project, and now needs to borrow $2,210,000 to complete the project. It therefore decides to issue $2,210,000 of 11.0%, 10-year bonds. These bonds were issued on January 1, 2024, and pay interest annually on each January 1. The bonds yield 10%. Click here to view factor table. (a) Prepare the journal entry to record the issuance of the bonds on January 1, 2024. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places, e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Date January 1, 2024 Account Titles and Explanation Debit Credit
On January 1, 2024, Splash City issues $320,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 9% and the bonds issued at $293,938. If the market interest rate drops to 7% on December 31, 2025, it will cost $347,025 to retire the bonds. Record the retirement of the bonds on December 31, 2025.
a) Kirpalani Limited wants to expand its furniture line. The board of directors have agreed that the fastest way to raise these funds is to issue bonds. The company proceeds to issue $600,000, 10% bonds on March 1st, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. The company closes its books on December 31. Requirements: (Show all workings) I. Calculate the proceeds from the sale of the bond. Clearly show the amount of the premium or discount and state two reasons which support the premium or discount calculated. II. Prepare a bond amortization schedule for the bond’s life III. Prepare all the journal entries for 2020 & 2021

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