Generally Accepted Accounting Principles and Amortization
E14-4 (Entries for Bond Transactions—Straight-Line)
Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2011, at 102. Interest is payable semiannually on July 1 and January 1. Foreman Company uses the straight-line method of amortization for bond premium or discount.
Instructions:
Prepare the journal entries to record the following. a. The issuance of the bonds. b. The payment of interest and the related amortization on July 1, 2011. c. The accrual of interest and the related amortization on December 31, 2011.
E14-6 (Amortization Schedules—Straight-Line)
Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2010, and mature January 1, 2015. Interest is payable annually on January 1.
Instructions:
Set up a schedule of interest expense and discount amortization under the straight-line method.
E14-7 (Amortization Schedule—Effective-Interest)
Assume the same information as E14-6.
Instructions:
Set up a schedule of interest expense and discount amortization under the effective-interest method. (Hint: The effective interest rate must be computed.)
E14-9 (Entries and Questions for Bond Transactions)
On June 30, 2010, Mackes Company issued $5,000,000 face value of 13%, 20-year bonds at $5,376,150, a yield of 12%. Mackes uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Instructions:
a. Prepare the journal entries to record the following transactions. 1. The issuance of the bonds on June 30, 2010. 2. The payment of interest and the amortization of the premium on December 31, 2010. 3. The payment of interest and the amortization of the premium on June 30, 2011. 4. The payment of interest and the amortization of the premium on December 31, 2011. b. Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2011, balance sheet. c.
Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2011, at 102. Interest is payable semiannually on July 1 and January 1. Foreman Company uses the straight-line method of amortization for bond premium or discount.
Instructions:
Prepare the journal entries to record the following. a. The issuance of the bonds. b. The payment of interest and the related amortization on July 1, 2011. c. The accrual of interest and the related amortization on December 31, 2011.
E14-6 (Amortization Schedules—Straight-Line)
Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2010, and mature January 1, 2015. Interest is payable annually on January 1.
Instructions:
Set up a schedule of interest expense and discount amortization under the straight-line method.
E14-7 (Amortization Schedule—Effective-Interest)
Assume the same information as E14-6.
Instructions:
Set up a schedule of interest expense and discount amortization under the effective-interest method. (Hint: The effective interest rate must be computed.)
E14-9 (Entries and Questions for Bond Transactions)
On June 30, 2010, Mackes Company issued $5,000,000 face value of 13%, 20-year bonds at $5,376,150, a yield of 12%. Mackes uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Instructions:
a. Prepare the journal entries to record the following transactions. 1. The issuance of the bonds on June 30, 2010. 2. The payment of interest and the amortization of the premium on December 31, 2010. 3. The payment of interest and the amortization of the premium on June 30, 2011. 4. The payment of interest and the amortization of the premium on December 31, 2011. b. Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2011, balance sheet. c.