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Chapter 12: Q8RQ (page 654)
When a bond is issued, what is its present value?
The long term-debt is a debt that is not due in one year.
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What is the journal entry to retire bonds at maturity?
Using the effective-interest amortization method
On December 31, 2018, when the market interest rate is 6%, Benson Realty issues
\(700,000 of 6.25%, 10-year bonds payable. The bonds pay interest semiannually. Benson
Realty received \)713,234 in cash at issuance.
Requirements
1. Prepare an amortization table using the effective interest amortization method for
the first two semiannual interest periods. (Round to the nearest dollar.)
2. Using the amortization table prepared in Requirement 1, journalize issuance of the
bonds and the first two interest payments.
Payne Corporation has the folowing accounts as of December 31, 2018:
Total Assets $60,000
Total Liabilities 20,000
Total Equity 40,000
Compute the debt to equity ratio at December 31,2018.
Journalizing bond transactions including retirement at maturity
McQueen Company issued a $100,000, 7.5%, 10-year bond payable. Journalize
the following
transactions for McQueen Company, and include an explanation for each
entry:
a. Issuance of the bond payable at face value on January 1, 2018.
b. Payment of semiannual cash interest on July 1, 2018.
c. Payment of the bond payable at maturity, assuming the last interest
payment had
already been recorded. (Give the date.)
Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:
3. A 10% bonds payable is issued when the market interest rate is 8%.
4. A 10% bonds payable is issued when the market interest rate is 10%.
5. A 10% bonds payable is issued when the market interest rate is 12%.
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