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 journal entries for 2020 & 2021

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 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 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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