Show the proper presentation for the liability section

Reference no: EM132082483

Question: United Corporation issued $10,000,000 of 7% bonds on February 1, 2017 to fund the firm's expansion into the French market. The bonds are due on January 1, 2027. The interest is to be paid twice each year on July 1 and January 1. Due to unexpected monetary policy action by the US Federal Reserve, interest rates fell just prior to MYF's issuance of the bonds. Thus, the bonds were sold to provide an annual yield of 5% to lenders. MYF closes its books annually on December 31 and uses the effective interest method. Premiums and or discounts are amortized each time interest is paid or accrued.

INSTRUCTIONS [round all amounts to the nearest dollar]:

(a) Prepare proper journal entries to record the following: 1. The issuance of the bonds by MYF on February 1, 2017

2. The payment of interest and the amortization of the premium or discount on July 1, 2017.

3. The payment of interest and the amortization of the premium or discount on December 31, 2017.

4. The payment of interest on January 1, 2018

(b) Show the proper presentation for the liability section MYF's balance sheet on December 31, 2017.

(c) Assume that on January 2, 2020 the firm [MYF] had extra cash and decided to pay off 60% of the bonds at a price of 103. Record the journal entry for the partial payment including any loss or gain from the partial pay-off.

Reference no: EM132082483

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