Reference no: EM13836800
1. On December 1, 20x1, Land Co. issued a $100,000, 5-month, note to Castle Bank. Interest was discounted at issuance at a 8% discount rate. Prepare journal entries for Land on:
(1) December 1, 20x1
(2) December 31, 20x1
(3) May 1, 20x2 (maturity)
2. Ontario Resources, a natural energy supplier, borrowed $80 million cash on November 1, 20x1, to fund a geological survey. The loan was made by Quebec Banque under a short-term credit line. Ontario Resources issued a 9-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year.
(1) Prepare the journal entry for the issuance of the note by Ontario Resources.
(2) Prepare the appropriate adjusting entry for the note by Ontario Resources on December 31, 20x1. Show calculations.
(3) Prepare the journal entry for the payment of the note at maturity. Show calculations.
3. On November 1, 20x1, Bishop Company issued 10% bonds with a face amount of $20 million. The bonds mature in 10 years. For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on April 30 and October 31. Bishop is a calendar-year corporation.
(1.) Determine the price of the bonds at November 1, 20x1.
(2.) Prepare the journal entry to record the bond issuance by Bishop on November 1, 20x1.
(3.) Prepare the journal entries (using the effective interest method):
a. December 31, 20x1
b. April 30, 20x2
c. October 31, 20x2
*Assume no reversing entry is recorded on January 1, 20x2.
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: 1. On December 1, 20x1, Land Co. issued a $100,000, 5-month, note to Castle Bank. Interest was discounted at issuance at a 8% discount rate. Prepare journal entries for Land on:
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