Manco Co. issued $2.60 million face amount of 6%, 10-year bonds on June 1, 2013.
ID: 2492543 • Letter: M
Question
Manco Co. issued $2.60 million face amount of 6%, 10-year bonds on June 1, 2013. The bonds pay interest on an annual basis on May 31 each year.
independent of your answer to part (a), assume that the proceeds were $2,237,000. Use the horizontal model to show the effect of issuing the bonds.
Independent of your answer to part (a), assume that the proceeds were $2,237,000. Record the journal entry to show the effect of issuing the bonds.
Calculate the interest expense that Coley Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2013, assuming that the discount of $363,000 is amortized on a straight-line basis.
A) Accrued Interest Payable=
B)Discount Amortization=
C) Interest expense for 4 months=
Explanation / Answer
Manco Company Bond Details Amt $ Bond Face value 2,600,000 Bond Issue Price 2,237,000 Discount on Bond Payable 363,000 Bond life in years 10 Yearly SL amortization of discount = 36,300 SL amortization of Bond discount in 4 months= 12,100 Yearly interest payable @6%= 156,000 Interest payable for 4 months= 52,000 a Horizontal Model Assets Liabilities Cash = Bond Payable + Discount on Bond Payable 2,237,000 2,600,000 + (363,000) b Journal Entry for Bond Issue Account details Dr $ Cr $ Cash 2,237,000 Bond Payable 2,600,000 Discount on Bond Payable 363,000 Sep 30 Interest Details A Accrued Interest Payable = 52,000 B Discount Amortization = 12,100 C Interest Expense for 4 Months = 64,100
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