Part 2 Ace Brick company issued $100,000 of 5-year bonds. The bonds were issed a
ID: 2466621 • Letter: P
Question
Part 2 Ace Brick company issued $100,000 of 5-year bonds. The bonds were issed at 103, and bear interest at a stated rate of 8% per annum, payable semiannually. The premium is amortized by the straight-line method. (a) Prepare the journal entry to record the initial issue on January, 20X1. (b) Prepare the journal entry that Horton would record on each interest date. (c) Prepare the journal entry that Horton would record at maturity of the bonds. (d) How much cash flowed "in" and "out" on this bond issue, and how does the difference compare to total interest expense that was recognized? Part 2 Ace Brick company issued $100,000 of 5-year bonds. The bonds were issued at 98, and bear interest at a stated rate of 8% per annum, payable semiannually. The discount is amortized by the straight-line method. (a) Prepare the journal entry to record the initial issue on January, 20X1. (b) Prepare the journal entry that Horton would record on each interest date. (c) Prepare the journal entry that Horton would record at maturity of the bonds. (d) How much cash flowed "in" and "out" on this bond issue, and how does the difference compare to total interest expense that was recognized? Part 2 Ace Brick company issued $100,000 of 5-year bonds. The bonds were issed at 103, and bear interest at a stated rate of 8% per annum, payable semiannually. The premium is amortized by the straight-line method. (a) Prepare the journal entry to record the initial issue on January, 20X1. (b) Prepare the journal entry that Horton would record on each interest date. (c) Prepare the journal entry that Horton would record at maturity of the bonds. (d) How much cash flowed "in" and "out" on this bond issue, and how does the difference compare to total interest expense that was recognized? Part 2 Ace Brick company issued $100,000 of 5-year bonds. The bonds were issued at 98, and bear interest at a stated rate of 8% per annum, payable semiannually. The discount is amortized by the straight-line method. (a) Prepare the journal entry to record the initial issue on January, 20X1. (b) Prepare the journal entry that Horton would record on each interest date. (c) Prepare the journal entry that Horton would record at maturity of the bonds. (d) How much cash flowed "in" and "out" on this bond issue, and how does the difference compare to total interest expense that was recognized?Explanation / Answer
Part2 (1)
a) cash ($100000*$103/$100) Dr.$103000
To Premium on Bond($100000*3%) $3000
To Bond payable $100000
b) Interest expense Dr.$7700
premium on Bond($3000 / 10) Dr.$300
To cash($100000 *8%) $8000
c) Bond payable Dr.$100000
To cash $100000
Note:- Straight line method amortisation
amortisation per interest period = 5 year bond * 2(semi-annually)
= 10
Amortisation per interest payment = $3000 / 10
= $300
(2) a) cash ($100000*$98/$100) Dr.$98000
Discount on Bond($100000*2%) Dr.$2000
To Bond payable $100000
b) Interest expense Dr.8200
To discount on bond ($2000 / 10) $200
To cash($100000 *8%) $8000
c) Bond payable Dr.$100000
To cash $100000
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