Randle Inc. issues $240,000, 10-year, 8% bonds at 96

Question 1
Randle Inc. issues $240,000, 10-year, 8% bonds at 96. Prepare the journal entry to record the sale of these bonds on March 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 2
Meera Corporation issued 2,400, 7%, 5-year, $1,000 bonds dated January 1, 2017, at 100. Interest is paid each January 1.
Prepare the journal entry to record the sale of these bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the adjusting journal entry on December 31, 2017, to record interest expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry on January 1, 2018, to record interest paid. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 3
Sweetwood Company issues $6,000,000, 10-year, 10% bonds at 98, with interest payable annually on January 1. The straight-line method is used to amortize bond discount.

Prepare the journal entry to record the sale of these bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the adjusting journal entry to record interest expense and bond discount amortization on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 4
On January 1, 2017, Klosterman Company issued $430,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1.
Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the accrual of interest on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the payment of interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 5
On January 1, 2017, Forrester Company issued $255,000, 9%, 5-year bonds at face value. Interest is payable annually on January 1.
Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the accrual of interest on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the payment of interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 6
Whitmore Company issued $610,000 of 5-year, 5% bonds at 95 on January 1, 2017. The bonds pay interest annually.
Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Compute the total cost of borrowing for these bonds.

Prepare the journal entry to record the issuance of the bonds, assuming the bonds were issued at 104. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Compute the total cost of borrowing for these bonds, assuming the bonds were issued at 104.

Question 7
The adjusted trial balance for Karr Farm Corporation at the end of the current year contained the following accounts.
Interest Payable        $9,500
Lease Liability        87,000
Bonds Payable, due 2022        177,000
Premium on Bonds Payable        34,000

Prepare the long-term liabilities section of the balance sheet. (Enter account name only and do not provide descriptive information.)

Question 8
On May 1, 2017, Herron Corp. issued $660,000, 8%, 5-year bonds at face value. The bonds were dated May 1, 2017, and pay interest annually on May 1. Financial statements are prepared annually on December 31.
Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the adjusting entry to record the accrual of interest on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,675.)

Show the balance sheet presentation on December 31, 2017. (Enter account name only and do not provide descriptive information. Round answers to 0 decimal places, e.g. 5,675.)

Prepare the journal entry to record payment of interest on May 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,675.)

Prepare the adjusting entry to record the accrual of interest on December 31, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,675.)

Assume that on January 1, 2019, Herron pays the accrual bond interest and calls the bonds. The call price is 105. Record the payment of interest and redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,675.)

Question 9
The following section is taken from Mareska’s balance sheet at December 31, 2017.

Current liabilities
Interest payable        $51,500
Long-term liabilities
Bonds payable (8%, due January 1, 2021)        550,000

Interest is payable annually on January 1. The bonds are callable on any annual interest date.

Journalize the payment of the bond interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Assume that on January 1, 2018, after paying interest, Mareska calls bonds having a face value of $240,000. The call price is 101. Record the redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the adjusting entry on December 31, 2018, to accrue the interest on the remaining bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 10
Presented below are three different lease transactions that occurred for Ruggiero Inc. in 2017. Assume that all lease contracts start on January 1, 2017. In no case does Ruggiero receive title to the properties leased during or at the end of the lease term.
Lessor
Judson Delivery        Hester Co.        Gunselman Auto
Type of property        Computer        Delivery equipment        Automobile
Yearly rental        $6,300        $5,500        $5,000
Lease term        6 years        4 years        2 years
Estimated economic life        7 years        7 years        5 years
Fair value of lease asset        $30,000        $21,500        $13,500
Present value of the lease rental payments        $28,500        $15,500        $8,900
Bargain purchase option        None        None        None

How should the lease transaction for Hester Co. be recorded in 2017? (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

How should the lease transaction for Judson Delivery be recorded on January 1, 2017? (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 11
Paris Electric sold $3,800,000, 8%, 10-year bonds on January 1, 2017. The bonds were dated January 1 and pay interest annually on January 1. Paris Electric uses the straight-line method to amortize bond premium or discount. The bonds were sold at 103.
Prepare the journal entry to record the issuance of the bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare a bond premium amortization schedule for the first 4 interest periods.

Prepare the journal entries for interest and the amortization of the premium in 2017 and 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Show the balance sheet presentation of the bond liability at December 31, 2018. (Enter account name only and do not provide descriptive information.)

Here’s the SOLUTION

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