PR 11-3A Entries for Bonds Payable, Including Bond Redemption Obj. 2 The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 20Y1 July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 20Y1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 20Y2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 2013 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Instructions 1. Journalize the entries to record the transactions. Round all amounts to the nearest dollar. 2. Indicate the amount of the interest expense in (a) 20Y1 and (b) 2012. 3. Determine the carrying amount of the bonds as of December 31, 2012. Answer + Check Figure: $64,317,346

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter11: Liabilities: Bonds Payable

Section: Chapter Questions

Problem 11.3APR: Entries for bonds payable, including bond redemption The following transactions were completed by...

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Entries for bonds payable, including bond redemption The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1. July 1 Issued 74,000,000 of 20-year, 11 % callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of 63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 3 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is 9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Instructions 1. Journalize the entries to record the transactions. (Round all amounts to the nearest dollar.) 2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2. 3. Determine the carrying amount of the bonds as of December 31, Year 2.
Bond discount, entries for bonds payable transactions On July 1, Year 1, Danzer Industries Inc. issued 40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of 37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. (Appendix 1) Compute the price of 37,282,062 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)
Bond discount, entries for bonds payable transactions On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued 46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of 42,309,236. Interest on the builds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. (Appendix 1) Compute the price of 42,309,256 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)

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