Determine the total interest expenses for 2014. Will the bond proceeds always be

Question

Determine the total interest expenses for 2014. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of intrest? (Appendix 1) Compute the price of dollar 42,309,236 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar). Bond premium, entries for payable transactions Rodgers Corporation produces and sells football equipment. On July 1, 2014, Rodgres Corporation issued dollar 65,000,000 of 10-year, 12 percentage bonds at a market (effective) interest rate of 10 percentage, receiving cash of dollar 73,100,469. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1 ,2014 Journalize the entries to record the following: The first semiannual interest payment on December 31, 2014, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) The interest payment on June 30, 2015, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) Determine the interest expense foe 2014. Will the bond proceeds always be greater than the face amount of the bonds when then contract rate is greater than the market rate of interest?

Explanation / Answer

1.

2(a)

2(b)

3.

Total interest for 2014 is

$ 32, 50,000

Account title and explanation Debit Credit Cash 73100469           To 12 % Bonds Payable 65000000          To Premium on Bonds Payable 8100469 (Being Cash received on Issuance of Bond)

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