On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value

P10-3A On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2011, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31.

Instructions
a) Prepare the journal entry to record the issuance of the bonds
b) Prepare the adjusting entry to record the accrual of interest on December 31, 2011
c) Show the balance sheet presentation on December 31, 2011.
d) Prepare the journal entry to record payment of interest of May 1, 2012, assuming no accrual of interest from January 1, 2012 to May 1, 2012.
e) Prepare the journal entry to record payment of interest on November 1, 2012
f) Assume that on November 1, 2012, Newby calls the bonds at 102. record the redemption of the bonds.


Click here for the solution: On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value

On July 1, 2006, Kingston Satellites issued $3,600,000 face value, 9%, 10-year bonds at $3,375,680

P11-6A On July 1, 2006, Kingston Satellites issued $3,600,000 face value, 9%, 10-year bonds at $3,375,680. This price resulted in an effective-interest rate of 10% on the bonds. Kingston uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2006.
(b) Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2006.
(c) Prepare the journal entry to record the payment of interest and the amortization of the discount on July 1, 2007, assuming that interest was not accrued on June 30.
(d) Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2007.
(e) Prepare an amortization table through December 31, 2007 (3 interest periods) for this bond issue.


Click here for the solution: On July 1, 2006, Kingston Satellites issued $3,600,000 face value, 9%, 10-year bonds at $3,375,680

National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011

E 14-10 Issuance of bonds; effective interest; amortization schedule

National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011. The bonds mature in 2014 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31.

Required:
1. Determine the price of the bonds at January 1, 2011.
2. Prepare the journal entry to record their issuance by National on January 1, 2011.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2011.
5. Prepare the appropriate journal entries at maturity on December 31, 2014.


Click here for the solution: National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011

On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000

E 14-11 Bonds; effective interest; adjusting entry

On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000. The bonds sold for $731,364 and mature on January 31, 2031 (20 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid semiannually on July 31 and January 31. Strauss-Lombardi's fiscal year ends December 31.

Required:
1. Prepare the journal entry to record their issuance by Strauss-Lombardi on February 1, 2011.
2. Prepare the journal entry to record interest on July 31, 2011 (at the effective rate).
3. Prepare the adjusting entry to accrue interest on December 31, 2011.
4. Prepare the journal entry to record interest on January 31, 2012.


Click here for the solution: On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000

On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000

E 14-12 Bonds; straight-line method; adjusting entry

On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000. The bonds sold for $294,000 and mature on February 28, 2031 (20 years). Interest is paid semiannually on August 31 and February 28. Stratford uses the straight-line method and its fiscal year ends December 31.

Required:
1. Prepare the journal entry to record the issuance of the bonds by Stratford Lighting on March 1, 2011.
2. Prepare the journal entry to record interest on August 31, 2011.
3. Prepare the journal entry to accrue interest on December 31, 2011.
4. Prepare the journal entry to record interest on February 28, 2012.


Click here for the solution: On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000

On January 1, 2011, Lowry Co. issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 8%, payable semiannually on June 30 and December 31

On January 1, 2011, Lowry Co. issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 8%, payable semiannually on June 30 and December 31. The bonds were sold to yield 10%. Table values are:

Present value of 1 for 10 periods at 8% 0.46319
Present value of 1 for 10 periods at 10% 0.38554
Present value of 1 for 20 periods at 4% 0.45639
Present value of 1 for 20 periods at 5% 0.37689
Present value of annuity for 10 periods at 8% 6.71008
Present value of annuity for 10 periods at 10% 6.14457
Present value of annuity for 20 periods at 4% 13.59033
Present value of annuity for 20 periods at 5% 12.46221

Instructions
(a) Calculate the issue price of the bonds.

Click here for the solution: On January 1, 2011, Lowry Co. issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 8%, payable semiannually on June 30 and December 31

Coley Co. issued $30 million face amount of 9%, 10-year bonds on June 1, 2009

Coley Co. issued $30 million face amount of 9%, 10-year bonds on June 1, 2009. The bonds pay interest on an annual basis on May 31, each year.

a.) Assume that the market interest rates were slightly higher than 9% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain.
b.) Independent of your answer to part A, assume that the proceeds were $26,640,000. Use the horizontal model to show the effect of issuing the bonds.
c.) Calculate the interest expense that Coley Co. will show with the respect to these bonds in its income statement for the fiscal year ended September 30, 2009, assuming that the discount rate of $360,000 is amortized on a straight-line basis.

Click here for the solution: Coley Co. issued $30 million face amount of 9%, 10-year bonds on June 1, 2009