Bridgewater Enterprises, a calendar year corporation, sold $1,000.000 of 105, S-

Question

Bridgewater Enterprises, a calendar year corporation, sold $1,000.000 of 105, S-year bonds 12 when the market value of bonds was %. The bonds on January 1,2015 for $962,3 are dated January 1 and pay interest on January 1 and July 1. The company uses the straighi- line method of amortization and rounds calculations to the nearest dollar a. Provide the following information with regard to these bonds I. Total interest expense (life of the bond) 2. Interest expense in 201s 3. Total cash inflows (life of the bond) 4. Total cash outflows (life of the bond) 5. Cash outflows in 2015 6. Cash outflows in 2016 b. Prepare the journal entries for the following dates I. January 1, 2015 2. July 1, 2015 3. December 31, 2015 4 January 1, 2016

Explanation / Answer

Total interst expense 500000 Interest expense 2015 100000 total cash inflows 962312 Total cash outflows 1500000 Cash Outflows 2015 50000 Cash Outflows 2016 100000 date Particulars debit credit 01-01-2015 Cash 962312 Discount on sale of bonds 37688 10% 5 year bonds 1000000 01-07-2015 Interest expense 50000 cash 50000 31-12-2015 Interest expense 50000 Outstanding interest 50000 Profit & loss a/c 7537.6 discount on sale of bonds 7537.6 (being amortization of discount on sale of bond) 01-01-2016 Outstanding Interest 50000 cash 50000

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