Part I FWP Co. issued $400,000, 10-year bonds on January 1, 2013. The stated rat
ID: 2474193 • Letter: P
Question
Part I FWP Co. issued $400,000, 10-year bonds on January 1, 2013. The stated rate of interest on the bonds is 10% payable annually on 12/31. Provide the requested information for the bonds immediately after issuance (January 1, 2013) under each of the three independent scenarios described below: Part II On January 1, 2014, FWP sells $3.5 million of 9% bonds at face value with interest to be paid at the end of each year. Prepare the journal entries on the following dates: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars not in millions.) (a) January 1, 2014 (the initial bond sale). (b) March 31, 2014 (the end of the first quarter). (c) December 31, 2014 (the payment of interest at the end of the year; assume that the interest owed for each of the first three quarters has been properly accrued).
Explanation / Answer
Answer
Answer Part I
FWP Co. issued $400,000, 10-year bonds on January 1, 2013.
The stated rate of interest on the bonds is 10% payable annually on 12/31.
Provide the requested information for the bonds immediately after issuance (January 1, 2013) under each of the three independent scenarios described below:
Note : Unable to answer the question as three independent scenarios are not provided.
Answer Part II
On January 1, 2014, FWP sells $3.5 million of 9% bonds at face value with interest to be paid at the end of each year.
Prepare the journal entries on the following dates: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars not in millions.)
Answer (a)
January 1, 2014 (the initial bond sale).
Cash A/c Dr. $ 3,500,000
To Bonds payable A/c Cr. $ 3,500,000
Answer (b)
March 31, 2014 (the end of the first quarter).
Interest expense A/c Dr. $ 78750 (3,500,000 *0.09 * 3 month / 12 month)
To interest payable A/c Cr. $ 78750
Answer (c)
December 31, 2014 (the payment of interest at the end of the year; assume that the interest owed for each of the first three quarters has been properly accrued).
Interest payable A/c Dr. $ 236250 (3,500,000*0.09* 9 month/ 12 month)
Interest expense A/c Dr. $ 78750 (3,500,000 *0.09 * 3 month / 12 month)
To Cash A/c Cr. $ 315000
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