Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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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 life
3. Prepare all the
(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 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 life
3. Prepare all the journal entries for 2022, 2023 & 2024
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