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Chapter 12: 4TI (page 636)
Herrera Corporation issued a $400,000, 4.5%, 10-year bond payable on January 1, 2018. Journalize the payment of the bond
payable at maturity. (Give the date.)
The bond payable debited and cash account is credited with $400,000 when the payment of the bonds is made.
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Analyzing and journalizing bond transactions
On January 1, 2018, Educators Credit Union (ECU) issued 8%, 20-year bonds payablewith face value of $1,000,000.These bonds pay interest on June 30 and December 31.The issue price of the bonds is 109.Journalize the following bond transactions:
a. Issuance of the bonds on January 1, 2018.
b. Payment of interest and amortization on June 30, 2018.
c. Payment of interest and amortization on December 31, 2018.
d. Retirement of the bond at maturity on December 31, 2037, assuming the lastinterest payment has already been recorded.
Determining bond amounts
Savvy Drive-Ins borrowed money by issuing $3,500,000 of 9% bonds payable
at 99.5. Interest is paid semiannually.
Requirements
1. How much cash did Savvy receive when it issued the bonds payable?
2. How much must Savvy pay back at maturity?
3. How much cash interest will Savvy pay each six months?
Journalizing bond issuance and interest payments
On June 30, Parker Company issued 11%, five-year bonds payable with a face value
of $120,000. The bonds are issued at face value and pay interest on June 30 and
December 31.
Requirements
1. Journalize the issuance of the bonds on June 30.
2. Journalize the semiannual interest payment on December 31
Determining the present value of bonds payable and journalizingusing the effective-interest amortization methodRelaxation, Inc. is authorized to issue 7%, 10-year bonds payable. On January 1, 2018,when the market interest rate is 12%, the company issues $300,000 of the bonds. Thebonds pay interest semiannually.
Requirements
1. How much cash did the company receive upon issuance of the bonds payable?(Round to the nearest dollar.)
2. Prepare an amortization table for the bond using the effective-interest method,through the first two interest payments (Round to the nearest dollar.)
3. Journalize the issuance of the bonds on January 1, 2018, and the first and secondpayments of the semiannual interest amount and amortization of the bonds onJune 30, 2018, and December 31, 2018. Explanations are not required.
Retiring bonds payable before maturity
CoastalView Magazineissued $600,000 of 15-year, 5% callable bonds payable on July31, 2018, at 94. On July 31, 2021, CoastalViewcalled the bonds at 101. Assume annualinterest payments.
Requirements
1. Without making journal entries, compute the carrying amount of the bonds payableat July 31, 2021.
2. Assume all amortization has been recorded properly. Journalize the retirement ofthe bonds on July 31, 2021. No explanation is required.
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