PROBLEM 11 (50%) Koresh Corp. issued S8,000.000, 10% 10-year bonds, dated April

Question

PROBLEM 11 (50%) Koresh Corp. issued S8,000.000, 10% 10-year bonds, dated April 1, with interest payment dates of September 30, and March 31 Assume the bonds were issued at 96 on April 1, 2016 1. Make the journal entry for April 1, 2016 2. Make the journal entry for 9/30/16if the straight method of amortization was A. being used 3. Make the journal entry for 9/30/201 Sunder the effective interest method is being used. The market rate is $1206. 4. Make the adjusting entry for December 31, 2015 (Assume the straight method is being used). 5. Make the entry for December 31, 2016 (Assume the straight-line method is being used) B. Assume the bonds above were issued at 105 on April 1, 20 6 . Make the journal entry for April 1, 2016 2. Make the journal for September 30, 2016(if the straight-line oft method of 3. Make the journal entry for 9/30 2016 if the effective method of amortization is 4. Make the adjusting entry for December 31, 2018(Assume the straight-line 5. Make the closing entry for December 31, 200(Assume the straight-line method amortization is being used). being used. (Assume the market rate was 8) s) method is being used) is being used) PROBLEM III (10%) On January 1, 2013, Soprano Corp. issued $1,000,000, 10%, 10-year bonds at 95 Soprano recorded the annual payment of interest and straight-line amortization of the discount each December 31", On January 1, 2017 Soprano retired the bonds recalling them at 101 REQUIRED: Prepare the jounal entry for the retirement of the bonds on January 1, 2017

Explanation / Answer

A. Assume the bonds were issued at 96 on April. 1, 2016

JOURNAL

Tr. #

Date

Account

Debit

Credit

1

April. 1

Cash

768000

Discount on Bonds Payable

32000

      Bonds Payable

800000

(Being issue of bonds payable at discount)

2

Sept. 30

Interest expense

41600

         Discount on Bonds Payable

1600

         Cash

40000

(Being interest paid and discount amortized)

3

Sept. 30

Interest expense

46080

         Discount on Bonds Payable

6080

         Cash

40000

(Being interest paid and discount amortized)

4

Dec. 31

Interest expense

20800

         Discount on Bonds Payable

800

         Cash

20000

(Being interest paid and discount amortized)

5

Dec. 31

Interest expense

23040

         Discount on Bonds Payable

3040

         Cash

20000

(Being interest paid and discount amortized)

B. Assume the bonds were issued at 105 on April. 1, 2016

JOURNAL

Tr. #

Date

Account

Debit

Credit

1

April. 1

Cash

840000

Discount on Bonds Payable

40000

      Bonds Payable

800000

(Being issue of bonds payable at discount)

2

Sept. 30

Interest expense

38000

Premium on Bonds Payable

2000

         Cash

40000

(Being interest paid and discount amortized)

3

Sept. 30

Interest expense

32000

         Discount on Bonds Payable

8000

         Cash

40000

(Being interest paid and discount amortized)

4

Dec. 31

Interest expense

19000

         Discount on Bonds Payable

1000

         Cash

20000

(Being interest paid and discount amortized)

5

Dec. 31

Interest expense

16000

         Discount on Bonds Payable

4000

         Cash

20000

(Being interest paid and discount amortized)

A. Assume the bonds were issued at 96 on April. 1, 2016

JOURNAL

Tr. #

Date

Account

Debit

Credit

1

April. 1

Cash

768000

Discount on Bonds Payable

32000

      Bonds Payable

800000

(Being issue of bonds payable at discount)

2

Sept. 30

Interest expense

41600

         Discount on Bonds Payable

1600

         Cash

40000

(Being interest paid and discount amortized)

3

Sept. 30

Interest expense

46080

         Discount on Bonds Payable

6080

         Cash

40000

(Being interest paid and discount amortized)

4

Dec. 31

Interest expense

20800

         Discount on Bonds Payable

800

         Cash

20000

(Being interest paid and discount amortized)

5

Dec. 31

Interest expense

23040

         Discount on Bonds Payable

3040

         Cash

20000

(Being interest paid and discount amortized)

B. Assume the bonds were issued at 105 on April. 1, 2016

JOURNAL

Tr. #

Date

Account

Debit

Credit

1

April. 1

Cash

840000

Discount on Bonds Payable

40000

      Bonds Payable

800000

(Being issue of bonds payable at discount)

2

Sept. 30

Interest expense

38000

Premium on Bonds Payable

2000

         Cash

40000

(Being interest paid and discount amortized)

3

Sept. 30

Interest expense

32000

         Discount on Bonds Payable

8000

         Cash

40000

(Being interest paid and discount amortized)

4

Dec. 31

Interest expense

19000

         Discount on Bonds Payable

1000

         Cash

20000

(Being interest paid and discount amortized)

5

Dec. 31

Interest expense

16000

         Discount on Bonds Payable

4000

         Cash

20000

(Being interest paid and discount amortized)

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