Reference no: EM133074060
Question - Plentiful Incorporated issues bonds with total face value of $500,000 on December 31, 2015, receiving $500,000 in cash. The bonds requires annual coupon payments and have a 10% stated annual interest rate. The bonds mature on December 31, 2020. For journal entries below, use the following abbreviations: CASH = cash, BONDS = bonds payable, INTEXP = interest expense, INTINC = interest income, INTPAY = interest payable, INTREC = interest receivable.
Required -
a. Prepare Plentiful's journal entry for December 31, 2015.
b. Prepare Plentiful's quarterly adjusting journal entry for March 31, 2016. (HINT: First use the stated terms of the bond to compute the annual coupon payment. Then adjust for one quarter.)
c. Assuming Plentiful has made appropriate adjusting entries for June 30. September 30, and December 31, prepare Plentiful's journal entry for the 1st coupon payment on December 31. 2016.
d. How much total interest expense will Plentiful record over the 5-year life of the bond?
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