Question 1: Lime Co. sells $6,000,000 of 9% bonds on April 1,2014. The bonds pay interest on October 1 and April 1. The due dateof the bonds is October 1, 2018. The bonds yield 8%. Issuance costswere $70,000, and all were incurred on April 1, 2014. The companyuses the effective interest method of accounting for bond premiumsand discounts. It records bond interest costs as a deferred chargeand amortizes them on a straight-line basis. Round all amounts tothe nearest dollar.
a) Determine the bond price, i.e., what it will sell for. Showall computations.
b) Prepare an amortization table for the life of the bonds ingood form.
c) Prepare journal entries for the following dates in properform, including explanations. ⢠April 1, 2014 ⢠October 1, 2014 â¢December 31, 2014 yearâend adjusting entries.
d) Provide income statement and classified balance sheetexcerpts for the bonds as of and for the year ended December 31,2014. Include a proper heading for each. Only show the categories(i.e., current assets, noncurrent liabilities, etc.) and line itemsand amounts that apply to this question. Do not show the cashaccount on these excerpts. (Do include cash if it is relevant tojournal entries.) e) Prepare journal entries for April 1, 2015 inproper form, including explanations. Assume the company does NOTmake reversing entries.
Question 2: Locate Accounting Standards Update (ASU) No.2015-03, issued April 2015, in the Accounting StandardsCodification, and answer the following questions in completesentences restating the questions. Do not copy and paste youranswers. This may be done in Word or Excel. a) What is the titleand subtitle of this ASU? b) What are the main provisions(requirements) of this ASU? c) What is its effective date? d) Howdoes this question affect (change your answers) to question 1 ofthis APP?
Question 1: Lime Co. sells $6,000,000 of 9% bonds on April 1,2014. The bonds pay interest on October 1 and April 1. The due dateof the bonds is October 1, 2018. The bonds yield 8%. Issuance costswere $70,000, and all were incurred on April 1, 2014. The companyuses the effective interest method of accounting for bond premiumsand discounts. It records bond interest costs as a deferred chargeand amortizes them on a straight-line basis. Round all amounts tothe nearest dollar.
a) Determine the bond price, i.e., what it will sell for. Showall computations.
b) Prepare an amortization table for the life of the bonds ingood form.
c) Prepare journal entries for the following dates in properform, including explanations. ⢠April 1, 2014 ⢠October 1, 2014 â¢December 31, 2014 yearâend adjusting entries.
d) Provide income statement and classified balance sheetexcerpts for the bonds as of and for the year ended December 31,2014. Include a proper heading for each. Only show the categories(i.e., current assets, noncurrent liabilities, etc.) and line itemsand amounts that apply to this question. Do not show the cashaccount on these excerpts. (Do include cash if it is relevant tojournal entries.) e) Prepare journal entries for April 1, 2015 inproper form, including explanations. Assume the company does NOTmake reversing entries.
Question 2: Locate Accounting Standards Update (ASU) No.2015-03, issued April 2015, in the Accounting StandardsCodification, and answer the following questions in completesentences restating the questions. Do not copy and paste youranswers. This may be done in Word or Excel. a) What is the titleand subtitle of this ASU? b) What are the main provisions(requirements) of this ASU? c) What is its effective date? d) Howdoes this question affect (change your answers) to question 1 ofthis APP?
Related questions
On April 1, 2014, Seminole Company sold 15,120 of its 11%,15-year, $1,000 face value bonds at 97. Interest payment dates areApril 1 and October 1, and the company uses the straight-linemethod of bond discount amortization. On March 1, 2015, Seminoletook advantage of favorable prices of its stock to extinguish 6,600of the bonds by issuing 217,800 shares of its $10 par value commonstock. At this time, the accrued interest was paid in cash. Thecompanyâs stock was selling for $32 per share on March 1,2015.
Prepare the journal entries needed on the books of Seminole Companyto record the following.
| (a) | April 1, 2014: issuance of the bonds. | |
| (b) | October 1, 2014: payment of semiannual interest. | |
| (c) | December 31, 2014: accrual of interest expense. | |
| (d) | March 1, 2015: extinguishment of 6,600 bonds. (No reversingentries made.) |
