Bond issue and bond retirement journal entries bond

Reference no: EM13356921

Bond issue and Bond retirement Journal entries, Bond amortization Schedule using effective interest method.

(Issuance and Retirement of Bonds) Palmiero Co. is building a new hockey arena at a cost of $2,000,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $1,500,000 to complete the project. It therefore decides to issue $1,500,000 of 10.5%, 10-year bonds. These bonds were issued on January 1, 2005, and pay interest annually on each January 1. The bonds yield 10%. Palmiero paid $50,000 in bond issue costs related to the bond sale.

Instruction

(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2005.

(b) Prepare a bond amortization schedule up to and including January 1, 2009, using the effective interest method.

(c) Assume that on July 1, 2008, Palmiero Co. retires half of the bonds at a cost of $800,000 plus accured interest. Prepare the journal entry to record this retirement.

(L0 4) P15-5 (Treasury Stock-Cost Method) Before Polska Corporation engages in the treasury stock transactions listed below, its general ledger reflects, among others, the following account balances (par value of its stock is $30 per share).

Pald-in Capital in Excess of Par	Common Stock	Retained Earnings
$99,000	$270,000	$80,000

Instructions

Record the treasury stock transactions (given below) under the cost method of handling treasury stock, use the FIFO method for purchase-sale purposes.

(a) Bought 380 shares of treasury stock at $39 per share.

(b) Bought 300 shares of treasury stock at $43 per share.

(c) Sold 350 shares of treasury stock at $42 per share.

(d) Sold 120 shares of treasury stock at $38 per share.

Reference no: EM13356921

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