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Calculate and record bond transactions

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Reference no: EM132466305

Question (a) Calculate bond issue and make amortization schedule of a bond premium.

  • Messer Company issued $600,000 of 8%, 7-year bonds on January 1, 2017. The bonds pay interest annually.

Instructions

(a) Assuming the market interest rate on January 1, 2017, was 7%, calculate the bond's issue price.

(b) Make an effective interest amortization table for this bond.

Question (b) Calculate bond issue and make amortization schedule of a bond discount.

  • Korman Company issued $800,000 of 7%, 7-year bonds on January 1, 2017. The bonds pay interest annually.

Instructions

(a) Assuming the market interest rate on January 1, 2017, was 8%, calculate the bond's issue price.

(b) Make an effective interest amortization table for this bond.

Question (c) Calculate and record bond transactions

  • Western Inc. issues $800,000 of 5-year, 6% bonds on January 1, 2017. The bonds pay interest annually.

Instructions

(a) Calculate the issue price of the bonds using a market rate of 5% and record the bond issue.

(b) Make an effective interest amortization table for the bonds.

(c) Prepare the journal entries to record the first three interest payments.

(d) Assuming Western has an October 31 year end, prepare the adjusting entry for interest on October 31, 2017.

Question (d) Prepare entries for bonds issued at a discount.

  • Amlani Company issues $500,000 of 5-year, 7% bonds on January 1, 2017. Interest is paid annually.

Instructions

(a) Assuming the market interest rate was 9% on the date of issue, record the issue of the bonds.

(b) Make an effective interest amortization table for the bonds.

(c) Prepare the journal entries to record the first three interest payments.

(d) Assuming Amlani has an October 31 year end, record the adjusting entry for interest on October 31, 2017.

Question (e) Prepare entries for bond redemption.

Two independent situations follow:

Point 1. Longbine Corporation redeemed $130,000 face value, 12% bonds on June 30, 2017, at 102. The bonds' amortized cost at the redemption date was $117,500. The bonds pay annual interest, and the interest payment due on June 30, 2017, has been made and recorded.

Point 2. Tastove Inc. redeemed $150,000 face value, 12.5% bonds on June 30, 2017, at 98. The bonds' amortized cost at the redemption date was $151,000. The bonds pay annual interest, and the interest payment due on June 30, 2017, has been made and recorded.
InstructionsFor each situation above, prepare the appropriate journal entry for the redemption of the bonds.

Reference no: EM132466305

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