Brief Exercise 14-1 Headland Corporation issues $410,000 of 9% bonds, due in 9 y

Question

Brief Exercise 14-1

Headland Corporation issues $410,000 of 9% bonds, due in 9 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%.

Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

Brief Exercise 14-2

The Skysong Company issued $370,000 of 8% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value.

Prepare Skysong’s journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)

No.

Date

Account Titles and Explanation

Debit

Credit

Brief Exercise 14-9

On January 1, 2017, Carla Corporation redeemed $440,000 of bonds at 96. At the time of redemption, the unamortized premium was $13,200.

Prepare the corporation’s journal entry to record the reacquisition of the bonds. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Maturity value of bonds payable $464,000 Present value of $464,000 due in 7 periods at 6%    ($464,000 X .66506) $308,588 Present value of interest payable semiannually    ($18,560 X 5.58238) $103,609 Proceeds from sale of bonds $412,197 Discount on bonds payable $51,803 Effective Interest Method 8% Bonds Sold to Yield 12% Date Credit Cash Debit Interest Expense Bond Discount Carrying Value of Bonds 03.01.17 $412,197 09.01.17 $18,560 $24,732 $6,172 $418,369 03.01.18 $18,560 $25,102 $6,542 $424,911 09.01.18 $18,560 $25,495 $6,935 $431,846 03.01.19 $18,560 $25,911 $7,351 $439,196 09.01.19 $18,560 $26,352 $7,792 $446,988 03.01.20 $18,560 $26,819 $8,259 $455,247 09.01.20 $18,560 $27,313 $8,753 $464,000

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