Southwest Corporation issued bonds with the following details:
Face value: $670,000 Interest: 10 percent per year payable each December 31 Terms: Bonds dated January 1, 2015, due five years from that date
The annual accounting period ends December 31. The bonds were issued at 103 on January 1, 2015, when the market interest rate was 9 percent. Assume the company uses straight-line amortization and adjusts for any rounding errors when recording interest expense in the final year.
Compute the cash received from the bond issuance in dollar. TIP: The issue price typically is quoted at a percentage of face value.
Prepare the journal entry to record the issuance of the bonds and the payment of interest on December 31, 2015 and 2016. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1. Record the issuance of bonds with a face value of $670,000 at 103.
2. Record the interest payment on December 31, 2015.
3. Record the interest payment on December 31, 2016.
How much interest expense would be reported on the income statements for 2015 and 2016?
Compute the bond value which should be reported on the balance sheets at December 31, 2015 and 2016.
SOUTHWEST CORPORATION Balance Sheet (partial) 2015 2016 Carrying Value
| Southwest Corporation issued bonds with the following details: |
| Face value: $670,000 |
| Interest: 10 percent per year payable each December 31 |
| Terms: Bonds dated January 1, 2015, due five years from that date |
| The annual accounting period ends December 31. The bonds were issued at 103 on January 1, 2015, when the market interest rate was 9 percent. Assume the company uses straight-line amortization and adjusts for any rounding errors when recording interest expense in the final year. Compute the cash received from the bond issuance in dollar. TIP: The issue price typically is quoted at a percentage of face value.
1. Record the issuance of bonds with a face value of $670,000 at 103. 2. Record the interest payment on December 31, 2015. 3. Record the interest payment on December 31, 2016. |
How much interest expense would be reported on the income statements for 2015 and 2016?
Compute the bond value which should be reported on the balance sheets at December 31, 2015 and 2016.
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Related questions
A company issued 25,000, 10-year, 5 percent, $100 bonds onJanuary 1 at face value. Interest is payable each December 31. |
(a) | The issuance of these bonds on January 1. |
(b) | The first interest payment on December 31. |
Indicate the effects of the amounts for the abovetransactions
Assets | = | Liabilities | + | Stockholdersâ Equity | |||
(a) | |||||||
(b) | |||||||
2. | Prepare the journal entries related for the abovetransactions. |
a) The company issued 25,000, 10-year, 5 percent, $100 bonds onJanuary 1 at face value. Interest is payable each December 31.Record the issuance of 25,000 bonds at face value for $100each.
b) The company issued 25,000, 10-year, 5 percent, $100 bonds onJanuary 1 at face value. Interest is payable each December 31.Record the interest payment on December 31.
A company issued 25,000, 10-year, 5 percent, $100 bonds onJanuary 1 at face value. Interest is payable each December 31. |
(a) | The issuance of these bonds on January 1. |
(b) | The first interest payment on December 31. |
Indicate the effects of the amounts for the abovetransactions
Assets | = | Liabilities | + | Stockholdersâ Equity | |||
(a) | |||||||
(b) | |||||||
2. | Prepare the journal entries related for the abovetransactions. |
a) The company issued 25,000, 10-year, 5 percent, $100 bonds onJanuary 1 at face value. Interest is payable each December 31.Record the issuance of 25,000 bonds at face value for $100each.
b) The company issued 25,000, 10-year, 5 percent, $100 bonds onJanuary 1 at face value. Interest is payable each December 31.Record the interest payment on December 31.
