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Chapter 14: Q4BE (page 753)
Assume the bonds in BE14-2 were issued at 103. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semi-annually.
The total for both the debit and credit sides is $339,000.
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E14-2 (L01) (Classification) The following items are found in the financial statements.
(a) Discount on bonds payable.
(b) Interest expense (credit balance).
(c) Unamortized bond issue costs.
(d) Gain on repurchase of debt.
(e) Mortgage payable (payable in equal amounts over next 3 years).
(f) Debenture bonds payable (maturing in 5 years).
(g) Notes payable (due in 4 years).
(h) Premium on bonds payable.
(i) Bonds payable (due in 3 years).
Instructions
Indicate how each of these items should be classified in the financial statements.
BE14-1 (L01) Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semi-annually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.
(Issuance of Bonds between Interest Dates, Straight-Line, Redemption) Presented below are selected transactions on the books of Simonson Corporation.
May 1, 2017 Bonds payable with a par value of \(900,000, which are dated January 1, 2017, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2027. (Use interest expense account for accrued interest.)
Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.)
Jan. 1, 2018 Interest on the bonds is paid.
April 1 Bonds with par value of \)360,000 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.)
Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.
Instructions
(Round to two decimal places.)
Prepare journal entries for the transactions above.
What disclosures are required relative to long-term debt and sinking fund requirements?
On January 2, 2012, Banno Corporation issued \(1,500,000 of 10% bonds at 97 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method.”)
The bonds are callable at 101 (i.e., at 101% of face amount), and on January 2, 2017, Banno called \)900,000 face amount of the bonds and redeemed them.
Instructions
Ignoring income taxes, compute the amount of loss, if any, to be recognized by Banno as a result of retiring the $900,000 of bonds in 2017 and prepare the journal entry to record the redemption.
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