Accounting Question

MGMT FFAC Ch 10: Exercises

Part A: Entity J issued $400,000, 10%, 10-year bonds on January 1, 2022, at 105. Interest is payable annually on December 31. Entity J uses the straight-line method of amortization and has a calendar year end.

Instructions

Prepare all journal entries made in 2022 related to the bond issue and a partial balance sheet showing the bonds at December 31.

Answer the following questions.

a. What amount was received for the bonds?

b. How much interest is paid each interest period?

c. What is the premium amortization for the first period?

d. How much interest expense is recorded on the first interest date?

e. What is the carrying value of the bonds after the first interest date?

Part B: On September 1, Entity K borrows $80,000 from New National Bank by signing a 6-month, 6%, interest-bearing note.

Instructions

Prepare the necessary entries below associated with the note payable on the books of Entity K.

(a) Prepare the entry on September 1 when the note was issued.

(b) Prepare any adjusting entries necessary on December 31 in order to prepare the financial statements. Assume no other interest accrual entries have been made.

(c) Prepare the entry to record payment of the note at maturity.