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Category > Management Posted 05 Jun 2017 My Price 11.00

Bond premium, entries for bonds payable transactions

PR 12-3A  Bond premium, entries for bonds payable transactions

Saverin Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin Inc. issued

$62,500,000 of 10-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $66,747,178. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Instructions

1.     Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2016.

2.     Journalize the entries to record the following:

a.    The first semiannual interest payment on December 31, 2016, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)

b.    The interest payment on June 30, 2017, and the  amortization  of  the  bond premium, using the straight-line method. (Round to the nearest dollar.)

3.     Determine the total interest expense for 2016.

4.     Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?

5.     (Appendix 1) Compute the price of 66,747,178 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)

Answers

Maurice Tutor
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Status NEW Posted 05 Jun 2017 08:06 PM My Price 11.00

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