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question a company issued 10 000 000 of 8 bonds on may 1 2015 andreceived cash total 4288588

Question

A company issued $10,000,000 of 8% bonds on May 1, 2015 andreceived cash totaling $8,872,628. The bonds pay interestsemiannually on May 1 and November 1. The maturity date on thesebonds is November 1, 2023. The company uses the effective-interestmethod of amortizing discounts and premiums. The bonds were sold toyield an effective-interest rate of 10%.

Management prepared the followingschedule:

                     Interest                         Cash                                  Discount Carrying

Date          Expense                 Interest                                                    Amortization             Value of Bonds

5/1/15                                                                                                            $8,872,628

11/1/15       $443,631                   $400,000                                $43,631 8,916,259

5/1/16           445,813                     400,000                                        45,813        8,962,072

 

Using the T-account ,prepare the journal entries, in T-account format, to recognizethe:

a.issuance of the bond on May 1,2015

b.accrual of interest & relatedamortization on October 31, 2015

c.payment of interest on November 1,2015

d.accrual of interest & relatedamortization on April 30, 2016

e.payment of interest on May 1,2016

 

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