On January 1, 2015, Splash City issues $390,000 of 7% bonds, due in 10 years, wi
ID: 2464679 • Letter: O
Question
On January 1, 2015, Splash City issues $390,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 7%, the bonds will issue at $390,000. Record the bond issue on January 1, 2015, and the first two semiannual interest payments on June 30, 2015, and December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Record the issuance of the bond -
Record the first semiannual interest payment -
Record the second semiannual interest payment -
B)
On January 1, 2015, Splash City issues $380,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 7%, the bonds will issue at $414,945.
1/1/15 - Cash Paid - Interest Expense - Decrease in Carrying Value - Carrying Value -
6/30/15 - Cash Paid - Interest Expense - Decrease in Carrying Value - Carrying Value -
12/31/15 - Cash Paid - Interest Expense - Decrease in Carrying Value - Carrying Value -
C) Record the bond issue on January 1, 2015, and the first two semiannual interest payments on June 30, 2015, and December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1/1/15 On January 1, 2015, Splash City issues $380,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $414,945. Record the issuance of the bond.
6/30/15 On January 1, 2015, Splash City issues $380,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $414,945. Record the first semiannual interest payment.
12/31/15 On January 1, 2015, Splash City issues $380,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $414,945. Record the second semiannual interest payment.
On January 1, 2015, Splash City issues $390,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.
Explanation / Answer
Jan 1 ,2105
Cash
$390,000
To bonds payable
$390,000
June 30
Interest expense
$13,650
To cash
$13,650
December 31
Interest expense
$13,650
To Cash
$13,650
B)Bonds issued at premium
Jan 1
Cash
$414,945
To Premium on bonds
34,945
To Bonds payable
380,000
June 30
Interest expense
(414,945@3.5%)
14,523
Premium on bonds
677
To Cash
15,200
Carrying value
=414,945 – 677 = 414,268
Dec 31
Interest expense
(414,268@3.5%)
14,499
Premium on bonds
701
To Cash
15,200
Carrying value
(414,268- 701 = 413,567
©
Date
Cash paid
Interest expense
Decrease in CV
Carrying value
Jan 1
414,945
June 30
15,200
14,523
677
414,268
Dec 31
15,200
14,499
701
413,567
Jan 1 ,2105
Cash
$390,000
To bonds payable
$390,000
June 30
Interest expense
$13,650
To cash
$13,650
December 31
Interest expense
$13,650
To Cash
$13,650
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