Accounting

P14-03A

 

Heathrow issues $2,900,000 of 9%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,549,590. Required: 1. Prepare the January 1, 2011, journal entry to record the bonds’ issuance. (Omit the “$” sign in your response.) Date General Journal Debit Credit Jan. 1 2(a) For each semiannual period, compute the cash payment. (Omit the “$” sign in your response.) Cash payment $ 2(b) For each semiannual period, compute the the straight-line premium amortization. (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Amount of premium amortized $ 2(c) For each semiannual period, compute the the bond interest expense. (Omit the “$” sign in your response.) Bond interest expense $ 3. Determine the total bond interest expense to be recognized over the bonds’ life. (Omit the “$” sign in your response.) Total bond interest expense $ 4. Prepare the first two years of an amortization table using the straight-line method. (Omit the “$” sign in your response.) Semiannual Period-End Unamortized Premium Carrying Value 1/01/2011 $ $ 6/30/2011 12/31/2011 6/30/2012 12/31/2012 5. Prepare the journal entries to record the first two interest payments. (Omit the “$” sign in your response.) Date General Journal Debit Credit June 30 Dec. 31

P1

4

0

2A

on

s Payable

Bonds Payable

.

«- Correct!

«- Correct!

«- Correct!

.

2,000,000

«- Correct!

Thirty payments of $60,000 $ 1,800,000

271,776

Total bond interest expense $ 2,071,776 «- Correct!

.

HEATHROW

Period

Discount

1,728,224 «- Correct!

«- Correct!

«- Correct!

«- Correct!

«- Correct!

HEATHROW
General Journal

.

Date Account Titles Debit Credit
2011

69,059

9,059 «- Correct!

Cash 60,000 «- Correct!

2011

69,059

Discount on Bonds Payable 9,059 «- Correct!
Cash 60,000 «- Correct!
To record six months’ interest and discount amortization.

Student Name: Jamie Schultea
Class:
Problem 14-02A
HEATHROW
General Journal
Part 1.
Date Account Titles Debit Credit
2011
Jan 1 Cash 1,728,244
Discount Bond 271,776 «- Correct!
2,000,000
Sold bonds on stated issue date.
Part 2
Cash payment $

60,000
Straight-line discount amortization 9,059
Bond interest expense 69,059
Part 3
Thirty payments of $60,000 $ 1,800,000
Par value at maturity
Total repaid $ 3,800,000
Less amount borrowed 1,728,224
Total bond interest expense $ 2,071,776
or:
Plus discount
Part 4
Unamortized Carrying
Semiannual Interest Value
1/1/11 $ 271,776
6/30/11 262,717 1,737,283
12/31/11 253,658 1,746,342
6/30/12 244,598 1,755,401
12/31/12 235,539 1,764,460
Part 5
Jun 30 Bond Interest

Expense
Discount on Bonds Payable
To record six months’ interest and discount amortization.
Dec 31 Bond Interest Expense

Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries “Carrying Value” will be verified.
Enter appropriate data in yellow cells. Your Credit entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.

Given P14-02A

HEATHROW

$ 2,071,776

Given Data P14-02A:
Bonds issued, face value $ 2,000,000
Annual interest 6%
Maturity in years 15
Issuance price $ 1,728,224
Check figures:
(3)
(4) 12/31/2012 carrying value $ 1,764,460

P14-03A

Student Name:

Class:

HEATHROW
General Journal

Date Account Titles Debit Credit
2011

Jan 1 Cash

on Bonds Payable

Bonds Payable

Part 2
Cash payment

9,059

Bond interest expense

«- Try again!

Part 3
Thirty payments of $60,000
Par value at maturity
Total repaid
Less amount borrowed
Total bond interest expense 0

or:
Thirty payments of $60,000

Total bond interest expense 0

Part 4

HEATHROW
Unamortized Carrying

Semiannual Interest Period Premium Value
1/1/11 0
6/30/11 0
12/31/11 0
6/30/12 0
12/31/12 0

HEATHROW
General Journal

Part 5

Date Account Titles Debit Credit
2011

Jun 30 Bond Interest Expense 108,847 «- Try again!

«- Try again!

Cash

2011

Dec 31 Bond Interest Expense 0
Premium on Bonds Payable 0
Cash

To record six months’ interest and premium amortization.

Problem 14-03A
Part 1
3,549,590
Premium 2,900,000 «- Try again!
649,590
Sold bonds on issue date at a premium.
$ 60,000
Straight-line premium amortization
108,847
Less premium
Premium on Bonds Payable 21,653
130,500
To record six months’ interest and premium amortization.

Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries “Carrying Value” will be verified.
Enter appropriate data in yellow cells. Your Debit entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.

Given P14-03A

HEATHROW
Bonds issued, face value $ 2,000,000
Annual interest 6%
Maturity in years 15

Issuance price

Check figures:

(3)

(4) 12/31/2012 carrying value

Given Data P14-03A:
$ 2,447,990
$ 1,352,010
$ 2,388,258

P14-06A

Student Name:
Class:

General Journal
Part 1.

Date Account Titles Debit Credit

2011

Jan 1 Cash
Discount on Bonds Payable 0
Bonds Payable

Sold bonds on stated issue date.

Par value at maturity
Total repaid
Less amount borrowed

Total bond interest expense 0

or:
Eight payments of $16,250

Plus discount

Total bond interest expense 0

PATTON

Semiannual
Interest Unamortized Carrying

Discount Value

1/1/11 0
6/30/11 0
12/31/11 0
6/30/12 0
12/31/12 0

PATTON
General Journal
Part 4
Date Account Titles Debit Credit
2011

Bond Interest Expense 0

Discount on Bonds Payable

Cash
To record six months’ interest and discount amortization.
2011

Bond Interest Expense 0

Discount on Bonds Payable
Cash
To record six months’ interest and discount amortization.

. Without providing numbers, describe how this change affects the amounts

Problem 14-06A
PATTON
Part 2.
Eight payments of $16,250
Part 3.
Period-End
June 30
Dec. 31
Part 5: Assume that the market rate on January 1, 2011, is 4% instead of
8%
reported on Patton’s financial statements.

Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries for “Carrying Value” will be verified.
Enter appropriate data in yellow cells. Your entries will be verified.
Enter a short answer in the space provided.

Given P14-06A

PATTON

Bonds issued, face value

Annual interest

Maturity in years 4
Issuance price

8%

Check figures:

Given Data P14-06A:
$ 650,000
5%
$ 584,361
Market interest rate
(2) $ 195,639
(3) 12/31/2012 Carrying value $ 617,181

P14-07A

Student Name:
Class:

PATTON
General Journal
Part 1.
Date Account Titles Debit Credit
2011
Jan 1 Cash
Discount on Bonds Payable 0
Bonds Payable
Sold bonds on stated issue date.
Part 2.
Eight payments of $16,250
Par value at maturity
Total repaid
Less amount borrowed
Total bond interest expense 0
or:
Eight payments of $16,250
Plus discount
Total bond interest expense 0
Part 3.
PATTON

Semiannual Cash Bond
Interest Interest Interest Discount Unamortized Carrying
Period-End

Expense

Discount Value

1/1/11 0
6/30/11 0
12/31/11 0
6/30/12 0
12/31/12 0

PATTON
General Journal
Part 4
Date Account Titles Debit Credit
2011

June 30 Bond Interest Expense
Discount on Bonds Payable 0

Cash
To record six months’ interest and discount amortization.
2011

Dec. 31 Bond Interest Expense

Discount on Bonds Payable 0
Cash
To record six months’ interest and discount amortization.

Problem 14-07A
Paid Amortization

Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries for “Carrying Value” will be verified.
Enter appropriate data in yellow cells. Your entries will be verified.
Enter appropriate data in yellow cells. Your entries “Total bond interest expense” will be verified.

Given P14-07A

PATTON
Bonds issued, face value $ 650,000
Annual interest 5%
Maturity in years 4
Issuance price $ 584,361
Market interest rate 8%
Check figures:
(2) $ 195,639

(3) 12/31/2012 Carrying value

Given Data P14-07A:
$ 614,614
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