On January 1, Montgomery Inc. issued $200,000 of 12%5-year bonds when the market interest
rate was 10%. The bonds pay interest semiannually on June 30th andDecember 31. Proceeds
received were $215,443.
These bonds were issued at a DISCOUNT/PREMIUM (circle one) becausethe Contract Rate is
EQUAL TO/ GREATER THAN/ LESS THAN (circle one) the MarketRate
Record the following transactions:
Bond issue on January 1
Paid semiannual interest on June 30
Amortized the bond premium or discount
On January 1, Montgomery Inc. issued $200,000 of 12%5-year bonds when the market interest
rate was 10%. The bonds pay interest semiannually on June 30th andDecember 31. Proceeds
received were $215,443.
These bonds were issued at a DISCOUNT/PREMIUM (circle one) becausethe Contract Rate is
EQUAL TO/ GREATER THAN/ LESS THAN (circle one) the MarketRate
Record the following transactions:
Bond issue on January 1
Paid semiannual interest on June 30
Amortized the bond premium or discount
Related questions
ABCCorporation issued 14%, 5-year bonds with a par value of $5,000,000on January 1, 2015. Interest is to be paid semiannually on eachJune 30 and December 31. The bonds were issued at $5,368,035 cashwhen the market rate for this bond was 12%.
(a) Prepare the general journal entry to record the issuance of thebonds on January 1, 2015.
1/1/15 | |||
(b) Show how the bonds would bereported on ABC's balance sheet at January 1, 2015.
Long-Term liabilities: | ||
(c) Assume that ABC uses the effectiveinterest method for amortizing any discount or premium on bonds.Prepare the general journal entry to record the first semiannualinterest payment on June 30, 2015. SHOW YOUR CALCULATIONS!
6/30/15 | |||
(d) Assume instead that ABC uses the straight-line method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the first semiannual interest payment onJune 30, 2015. SHOW YOUR CALCULATIONS!
6/30/15 | |||
(e) Assume that ABC uses the effective interest method foramortizing any discount or premium on bonds. Prepare the generaljournal entry to record the second semiannual interest payment onDecember 31, 2015. SHOW YOUR CALCULATIONS!
12/31/15 | |||
