Reference no: EM133124763
Questions -
Q1) Blue Spruce Corporation issues $410,000 of 10% bonds that are due in 8 years and pay interest semi-annually. At the time of issue, the market rate for such bonds is 8%.
Calculate the bonds' issue price by using (1) factor Tables A.2 and A.4, (2) a financial calculator, or (3) Excel function PV.
Q2) Sweet Acacia Ltd. needed funding to bridge the gap between paying its suppliers and collecting its receivables. As such, Sweet Acacia issued a $310,000, four-year, 5% note at face value to Easy Loan Bank on January 1, 2020, and received $310,000 cash. The note requires annual interest payments each December 31.
a) Prepare Sweet Acacia's journal entries to record the note issuance.
b) Prepare Sweet Acacia's journal entries to record the December 31, 2020 interest payment.
Q3) On May 1, 2020, Culver Corporation, a publicly listed corporation, issued $238,900 of five-year, 8% bonds, with interest payable semi-annually on November 1 and May 1. The bonds were issued to yield a market interest rate of 6%. Culver uses the effective interest method.
a) Calculate the present value (issue price) of the bonds on May 1 using (1) factor Tables A.2 and A.4, (2) a financial calculator, or (3) Excel function PV.
b) Prepare the journal entry to record the issue of the bonds on May 1.
c) Prepare the journal entry to record the first and second interest payments on November 1, 2020, and May 1, 2021.
Q4) Sheffield Corporation issued $560,000 of 8%, 9-year bonds on January 1, 2020, at face value. The bonds require annual interest payments each December 31. Costs associated with the bond issuance were $25,200. Sheffield follows ASPE and uses the straight-line method to amortize bond issue costs.
a) Prepare the journal entry for the January 1, 2020 issuance.
b) Prepare the journal entry for the December 31, 2020 interest payment and bond issuance cost amortization.
Q5) Blue Spruce Limited issued $472,000 of 7% bonds on January 1, 2020. The bonds are due on January 1, 2025, with interest payable each July 1 and January 1. The bonds are issued at 99. Blue Spruce Limited follows ASPE and records the amortization using the straight-line method.
a) Prepare the journal entry related to the bonds for January 1.
b) Prepare the journal entry related to the bonds for July 1.
c) Prepare the company's journal entry for December 31.