Szmanda Company issues 13%, five-year bonds, on December 31, 2015, with a par va
ID: 2581755 • Letter: S
Question
Szmanda Company issues 13%, five-year bonds, on December 31, 2015, with a par value of $210,000 and semiannual interest payments.
Use the above bond amortization table and prepare journal entries to record
(a) the issuance of bonds on December 31, 2015;
(b) the first interest payment on June 30, 2016; and
(c) the second interest payment on December 31, 2016.
Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2015 $ 7,200 $ 202,800 (1) 6/30/2016 6,480 204,240 (2) 12/31/2016 5,760 204,240Explanation / Answer
simple rate of return in percentage
(net operating income/initial investment)*100
(40000/300000)*100
13.33
Net operating income
40000
Initial investment
300000
Journal Entries
date
explanation
debit
credit
Dec 31 2015
cash
202800
discount on bonds payable
7200
bonds payable
210000
June 30 2016
interest expense
14370
cash
13650
discount on bonds payable
720
Dec 31 2016
interest expense
14370
cash
13650
discount on bonds payable
720
cash
2010000*6.5%
13650
discount amortized
7200-6480
720
discount amortized
7200-6480
720
simple rate of return in percentage
(net operating income/initial investment)*100
(40000/300000)*100
13.33
Net operating income
40000
Initial investment
300000
Journal Entries
date
explanation
debit
credit
Dec 31 2015
cash
202800
discount on bonds payable
7200
bonds payable
210000
June 30 2016
interest expense
14370
cash
13650
discount on bonds payable
720
Dec 31 2016
interest expense
14370
cash
13650
discount on bonds payable
720
cash
2010000*6.5%
13650
discount amortized
7200-6480
720
discount amortized
7200-6480
720
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