Bad 323
15 Minutes, Easy
PROBLEM 10.5A BLUE MOUNTAIN POWER COMPANY
General Journal
a.
2007 Aug 1 Cash Bonds Payable Bond Interest Payable Issued $10,000,000 face value of 10%, 20-year bonds at 100 plus accrued interest for three months ($10,000,000 x 10% x 3/12 = $250,000). 10,250,000 10,000,000 250,000
b.
Nov 1 Bond Interest Payable Bond Interest Expense Cash Paid semiannual interest ($10,000,000 x 10% x 1/2 = $500,000). 250,000 250,000 500,000
c.
Dec 31 Bond Interest Expense Bond Interest Payable To accrue two months' interest expense ($10,000,000 x 10% x 2/12 = $166, 667). 166,667 166,667
d.
2008 May 1 Bond Interest Payable Bond Interest Expense Cash To record semiannual bond interest payment and interest expense for four months since Dec. 31 ($10,000,000 x 10% x 4/12 = $333,333). 166,667 333,333 500,000
e.
The market rate of interest on the date of issuance was 10%. Because the bonds were issued at par (100), the market rate had to have equaled the contract interest rate printed on the bonds.
© The McGraw-Hill Companies, Inc., 2008 P10.5A
35 Minutes, Strong
PROBLEM 10.6A PARK RAPIDS LUMBER COMPANY
General Journal
a.
(1)
Bonds issued at 98: 2,693,334 26,667 2,666,667
2007 Dec 31 Bond Interest Expense Discount on Bonds Payable Bond Interest Payable To record accrual of bond interest expense for four months in 2007: Contract interest ($80,000,000 x 10% x 4/12) Discount amortization ($1,600,000 ÷ 20 years) x 4/12 Bond interest expense for four months 2008 Mar 1 Bond Interest Payable Bond Interest Expense Discount on Bonds Payable Cash To record semiannual bond interest payment and interest expense for two months (1/2 of interest for four months, as computed in preceding entry). * Bonds issued at 101: 2007 Dec 31 Bonds Interest Expense Premium on Bonds Payable Bond Interest Payable Accrual of interest on bonds for four months: Contract interest ($80,000,000 x 10% x 4/12) Less: Premium amortization ($800,000 ÷ 20 yrs) x 4/12
PROBLEM 10.5A BLUE MOUNTAIN POWER COMPANY
General Journal
a.
2007 Aug 1 Cash Bonds Payable Bond Interest Payable Issued $10,000,000 face value of 10%, 20-year bonds at 100 plus accrued interest for three months ($10,000,000 x 10% x 3/12 = $250,000). 10,250,000 10,000,000 250,000
b.
Nov 1 Bond Interest Payable Bond Interest Expense Cash Paid semiannual interest ($10,000,000 x 10% x 1/2 = $500,000). 250,000 250,000 500,000
c.
Dec 31 Bond Interest Expense Bond Interest Payable To accrue two months' interest expense ($10,000,000 x 10% x 2/12 = $166, 667). 166,667 166,667
d.
2008 May 1 Bond Interest Payable Bond Interest Expense Cash To record semiannual bond interest payment and interest expense for four months since Dec. 31 ($10,000,000 x 10% x 4/12 = $333,333). 166,667 333,333 500,000
e.
The market rate of interest on the date of issuance was 10%. Because the bonds were issued at par (100), the market rate had to have equaled the contract interest rate printed on the bonds.
© The McGraw-Hill Companies, Inc., 2008 P10.5A
35 Minutes, Strong
PROBLEM 10.6A PARK RAPIDS LUMBER COMPANY
General Journal
a.
(1)
Bonds issued at 98: 2,693,334 26,667 2,666,667
2007 Dec 31 Bond Interest Expense Discount on Bonds Payable Bond Interest Payable To record accrual of bond interest expense for four months in 2007: Contract interest ($80,000,000 x 10% x 4/12) Discount amortization ($1,600,000 ÷ 20 years) x 4/12 Bond interest expense for four months 2008 Mar 1 Bond Interest Payable Bond Interest Expense Discount on Bonds Payable Cash To record semiannual bond interest payment and interest expense for two months (1/2 of interest for four months, as computed in preceding entry). * Bonds issued at 101: 2007 Dec 31 Bonds Interest Expense Premium on Bonds Payable Bond Interest Payable Accrual of interest on bonds for four months: Contract interest ($80,000,000 x 10% x 4/12) Less: Premium amortization ($800,000 ÷ 20 yrs) x 4/12