On January 1, 2014, Frog Corporation sold a $2,400,000, 10 percent bond issue (8
ID: 2906110 • Letter: O
Question
On January 1, 2014, Frog Corporation sold a $2,400,000, 10 percent bond issue (8 percent market rate). The company does not use a premium account. The bonds were dated January 1, 2014, pay interest each June 30 and December 31, and mature in 3 years. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field
Prepare the journal entry to record the interest payment on June 30, 2014. Use effective-interest amortization. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Show how the bonds payable should be reported on the June 30, 2014, financial statements.
Required: 1.Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field
Explanation / Answer
1. 1st we have to find the price at which the bonds were issued and the amount that ATC received at issuance.
The price will be issued at face or par value of $2,400,000as the stated interest rate is the same as the market interest rate, i.e. 10%.
2. Prepare the journal entry to record the bond issuance.
Debit Cash $2,400,000
Credit Bonds payable $2,400,000
3. Prepare the journal entry to record the interest payment on December 31, 2014, assuming no interest has been accrued earlier in the year.
Debit Interest expense $ 240,000
Credit Cash $240,000 answer
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.