INSTRUCTIONS: Selected transactions of a corporation are listedbelow. For each transaction, indicate the account(s) to be debitedand the account(s) to be credited by inserting in the appropriatecolumns the letters that correspond to the accounts listed. (Do notrecord amounts.)
ACCOUNTS
A.Bonds Payable F.Gain on Redemption of Bonds K.Loss on Sale ofInvestments
B.Cash G.Interest Expense L.Premium on Bonds Payable C.CommonStock
H.Interest Revenue M.Premium on Common Stock
D.Discount on Bonds Payable I.Investment in Way Co. Bonds
E.Dividend Revenue J.Loss on Redemption of Bonds
Debit Credit
1-2.Issued $1,000,000 of 10% bonds at an effective rate of 11%
3-4.Paid semiannual interest and amortized premium or discount onbonds issued in Question 1-2
5-6 Issued $1,000,000 of 12% bonds, at an effective rate of11%
7-8 Paid semiannual interest and amortized premium or discounton bonds issued in Question 5-6
9-10 Issued $2,000,000 of 13% bonds, at an effective rate of10%
11-12 .Paid semiannual interest and amortized premium ordiscount on bonds issued in Question 9-10
INSTRUCTIONS: Selected transactions of a corporation are listedbelow. For each transaction, indicate the account(s) to be debitedand the account(s) to be credited by inserting in the appropriatecolumns the letters that correspond to the accounts listed. (Do notrecord amounts.)
ACCOUNTS
A.Bonds Payable F.Gain on Redemption of Bonds K.Loss on Sale ofInvestments
B.Cash G.Interest Expense L.Premium on Bonds Payable C.CommonStock
H.Interest Revenue M.Premium on Common Stock
D.Discount on Bonds Payable I.Investment in Way Co. Bonds
E.Dividend Revenue J.Loss on Redemption of Bonds
Debit Credit
1-2.Issued $1,000,000 of 10% bonds at an effective rate of 11%
3-4.Paid semiannual interest and amortized premium or discount onbonds issued in Question 1-2
5-6 Issued $1,000,000 of 12% bonds, at an effective rate of11%
7-8 Paid semiannual interest and amortized premium or discounton bonds issued in Question 5-6
9-10 Issued $2,000,000 of 13% bonds, at an effective rate of10%
11-12 .Paid semiannual interest and amortized premium ordiscount on bonds issued in Question 9-10
Related questions
Entries for Bonds Payable, including bond redemption
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:
| Year 1 | |
| July 1. | Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semiannually on December 31 and June 30. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. |
| 31. | Closed the interest expense account. |
| Year 2 | |
| June 30. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment.. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. |
| 31. | Closed the interest expense account. |
| Year 3 | |
| June 30. | Recorded the redemption of the bonds, which were called at 103. The balance in the bond premium account is $6,253,632 after payment of interest and amortization of premium have been recorded. (Record the redemption only.) |
1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
| Year 1 July1 | |||
| Dec.31 | |||
| Dec.31 | |||
| Year 2 June 30 | |||
| Dec.31 | |||
| Dec.31 | |||
| Year 3 June 30 | |||
2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2.
| a. Year 1 | $ |
| b. Year 2 | $ |
3. Determine the carrying amount of the bonds as of December 31, Year 2.
Entries for Bonds Payable and Installment Note Transactions
The following transactions were completed by Hobson Inc., whosefiscal year is the calendar year:
| 2016 | |
| July 1. | Issued $4,370,000 of five-year, 8% callable bonds dated July 1,2016, at a market (effective) rate of 9%, receiving cash of$4,197,109. Interest is payable semiannually on December 31 andJune 30. |
| Oct. 1. | Borrowed $170,000 as a 10-year, 8% installment note from MarbleBank. The note requires annual payments of $25,335, with the firstpayment occurring on September 30, 2017. |
| Dec. 31. | Accrued $3,400 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Dec. 31. | Closed the interest expense account. |
| 2017 | |
| June 30. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Sept. 30. | Paid the annual payment on the note, which consisted ofinterest of $13,600 and principal of $11,735. |
| Dec. 31. | Accrued $3,165 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Dec. 31. | Closed the interest expense account. |
| 2018 | |
| June 30. | Recorded the redemption of the bonds, which were called at 98.The balance in the bond discount account is $103,735 after paymentof interest and amortization of discount have been recorded.(Record the redemption only.) |
| Sept. 30. | Paid the second annual payment on the note, which consisted ofinterest of $12,661 and principal of $12,674. |
Required:
1. Journalize the entries to record theforegoing transactions. For compound transactions, if an amount boxdoes not require an entry, leave it blank or enter "0". Whenrequired, round your answers to the nearest dollar.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 2016 | |||
| July 1 | Cash | ||
| Discount on bonds payable | |||
| Bonds payable | |||
| Oct. 1 | Cash | ||
| Notespayable | |||
| Dec. 31-Note | Interest expense | ||
| Notespayable | |||
| Dec. 31-Bond | Cash | ||
| Interest expense | |||
| Gain on bonds payable | |||
| Dec. 31-Closing | Bonds payable | ||
| Discount onbonds payable | |||
| 2017 | |||
| June 30 | Cash | ||
| Discount on bonds payable | |||
| Interest expense | |||
| Sept. 30 | Interest expense | ||
| Notes payable | |||
| Cash | |||
| Dec. 31-Note | |||
| Dec. 31-Bond | Notes payable | ||
| Interest expense | |||
| Cash | |||
| Dec. 31-Closing | Discount on bonds payable | ||
| Bondspayable | |||
| 2018 | |||
| June 30 | Bonds payable | ||
| Cash | |||
| Gain on redemption of bonds | |||
| Sept. 30 | |||
| Notes payable | |||
2. Indicate the amount of the interest expensein (a) 2016 and (b) 2017.
a. 2016 $
b. 2017 $
3. Determine the carrying amount of the bondsas of December 31, 2017.
$
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
| Year 1 | ||
| July | 1 | Issued $58,800,000 of 20-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of $50,482,396. Interest is payable semiannually on December 31 and June 30. |
| Dec. | 31 | Paid the semiannual interest on the bonds. The bond discount amortization of $207,940 is combined with the semiannual interest payment. |
| 31 | Closed the interest expense account. | |
| Year 2 | ||
| June | 30 | Paid the semiannual interest on the bonds. The bond discount amortization of $207,940 is combined with the semiannual interest payment. |
| Dec. | 31 | Paid the semiannual interest on the bonds. The bond discount amortization of $207,940 is combined with the semiannual interest payment. |
| 31 | Closed the interest expense account. | |
| Year 3 | ||
| June | 30 | Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $7,485,844 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) |
Required:
| 1. | Journalize the entries to record the transactions. Round all amounts to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles. |
| 2. | Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2. |
| 3. | Determine the carrying amount of the bonds as of December 31, Year 2. |
