Reference no: EM131721941
Question 1 - Park Corporation is planning to issue bonds with a face value of $760,000 and a coupon rate of 7.5 percent. The bonds mature in 6 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)
Required:
1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the issuance of bonds.
2. Prepare the journal entry to record the interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the interest payment on June 30 using effective-interest amortization.
3. What bond payable amount will Park report on its June 30 balance sheet? (Enter all amounts with a positive sign.)
Question 2 - Santa Corporation issued a bond on January 1 of this year with a face value of $1,000. The bond's coupon rate is 6 percent and interest is paid once a year on December 31. The bond matures in three years. The annual market rate of interest was 9 percent at the time the bond was sold. The following amortization schedule pertains to the bond issued:
| |
Cash
Paid |
Interest
Expense |
Amortization |
Balance |
| January 1, Year 1 |
|
|
|
$924 |
| December 31, Year 1 |
$60 |
$83 |
$23 |
947 |
| December 31, Year 2 |
60 |
85 |
25 |
972 |
| December 31, Year 3 |
60 |
88 |
28 |
1,000 |
|
Required:
1. What was the bond's issue price?
2. Did the bond sell at a discount or a premium? How much was the premium or discount?
3. What amount(s) should be shown on the balance sheet for bonds payable at the end of Year 1 and Year 2?
4. Show how the following amounts were computed for Year 2: (a) $60, (b) $85, (c) $25, and (d) $972. (Enter percentages in decimals.)
Question 3 - Claire Corporation is planning to issue bonds with a face value of $270,000 and a coupon rate of 6 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Claire uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
Required:
1. Provide the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.) Record the issuance of the bonds on January 1.
2. Provide the journal entry to record the interest payment on March 31, June 30, September 30, and December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.) Record the interest payment on March 31.
- Record the interest payment on June 30.
- Record the interest payment on September 30.
- Record the interest payment on December 31.
3. What bonds payable amount will Claire report on this year's December 31 balance sheet? (Round your final answers to nearest whole dollar amount.)
Bonds payable ____