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11 Apr 2021
On January 1, 2016, Knorr Corporation issued $700,000 of 6%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 7%. Bond issue costs associated with the bonds totaled $8,312.46.
Required:
Prepare the journal entries to record the following:
January 1, 2016
Sold the bonds at an effective rate of 7%
December 31, 2016
First interest payment using the effective interest method
December 31, 2016
Amortization of bond issue costs using the straight-line method
December 31, 2017
Second interest payment using the effective interest method
December 31, 2017
Amortization of bond issue costs using the straight-line method
On January 1, 2016, Knorr Corporation issued $700,000 of 6%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 7%. Bond issue costs associated with the bonds totaled $8,312.46.
Required:
| Prepare the journal entries to record the following: |
| January 1, 2016 | Sold the bonds at an effective rate of 7% |
| December 31, 2016 | First interest payment using the effective interest method |
| December 31, 2016 | Amortization of bond issue costs using the straight-line method |
| December 31, 2017 | Second interest payment using the effective interest method |
| December 31, 2017 | Amortization of bond issue costs using the straight-line method |
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Related questions
Chowan Corporation issued $115,000 of 9% bonds dated January 1,2016, for $111,283.65 on January 1, 2016. The bonds are dueDecember 31, 2019, were issued to yield 10%, and pay interestsemiannually on June 30 and December 31. Chowan uses the effectiveinterest method of amortization.
Required:
| Prepare the journal entries torecord the issue of the bonds on January 1, 2016, and the interestpayments on June 30, 2016, December 31, 2016, and June 30, 2017. Inaddition, prepare a bond interest expense and discount amortizationschedule for the bonds through June 30, 2017. |
| BONDS |
| On January 1, 2016, Lagune& Sons issued 9% bonds dated January 1, 2016, with a faceamount of $200,000. The bonds sold for $182,841 and mature in 20years. The effective interest rate for these bonds was 10%.Interest is paid semiannually on July 1 and December 31. Lagune'sfiscal year is the calendar year. |
REQUIRED:
| 1. Prepare the journal entryto record the bond issuance on January 1, 2016. |
| 2. Prepare the entry to record interest onJuly 1, 2016, using the effective interest method. |
| 3. Prepare the necessary journal entry onDecember 31, 2016. |
| 4. Prepare the entry to record interest onJuly 1, 2016, using the straight-line method. |
| 5. Prepare the necessary journal entry onDecember 31, 2016 using the straight-line methods. |
