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C10-Exercises

E10-6 pg. 490
According to the accountant of Ulner Inc., its payroll taxes for the week were as follows:
$198.40 for FICA taxes, $19.84 for federal unemployment taxes, and $133.92 for state
unemployment taxes.
Instructions
Journalize the entry to record the accrual of the payroll taxes.
ACCOUNT TITLE DEBIT CREDIT
E10-8 pg. 491
Jim Thome has prepared the following list of statements about bonds. True/False
1. Bonds are a form of interest-bearing notes payable.
2. When seeking long-term financing, an advantage of issuing bonds over issuing common
stock is that stockholder control is not affected.
3. When seeking long-term financing, an advantage of issuing common stock over issuing
bonds is that tax savings result.
4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds.
5. Secured bonds are also known as debenture bonds.
6. Bonds that mature in installments are called term bonds.
7. A conversion feature may be added to bonds to make them more attractive to bond buyers.
8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate.
9. Bond prices are usually quoted as a percentage of the face value of the bond.
10. The present value of a bond is the value at which it should sell in the marketplace.
E10-18 pg. 493
Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for
$562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable
semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize
bond premium or discount.
Instructions
Prepare the journal entries to record the following. (Round to the nearest dollar.)
(a) The issuance of the bonds.
ACCOUNT TITLE DEBIT CREDIT
(b) The payment of interest and the discount amortization on July 1, 2011, assuming that interest
was not accrued on June 30.
ACCOUNT TITLE DEBIT CREDIT
(c) The accrual of interest and the discount amortization on December 31, 2011.
ACCOUNT TITLE DEBIT CREDIT

P10-3A

P10-3A pgs. 494-495
On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The
bonds were dated May 1, 2011, and pay interest semiannually on May 1 and November 1.
Financial statements are prepared annually on December 31.
Instructions
(a) Prepare the journal entry to record the issuance of the bonds.
DATE ACCOUNT TITLE DEBIT CREDIT
(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2011.
DATE ACCOUNT TITLE DEBIT CREDIT
(c) Show the balance sheet presentation on December 31, 2011.
(d) Prepare the journal entry to record payment of interest on May 1, 2012, assuming no accrual
of interest from January 1, 2012, to May 1, 2012.
DATE ACCOUNT TITLE DEBIT CREDIT
(e) Prepare the journal entry to record payment of interest on November 1, 2012.
DATE ACCOUNT TITLE DEBIT CREDIT
(f) Assume that on November 1, 2012, Newby calls the bonds at 102. Record the redemption of
the bonds.
DATE ACCOUNT TITLE DEBIT CREDIT

P10-6A

P10-6A pg. 495
On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-year
bonds at $2,271,813.This price resulted in an effective-interest rate of 8% on the bonds. Atwater
uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual
interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011.
DATE ACCOUNT TITLE DEBIT CREDIT
(b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bond
issue.
ATWATER CORPORATION
Bond Premium Amortization
Effective-Interest Method—Semiannual Interest Payments
10% Bonds Issued at 8%
Semi-
Annual Interest Premium Unamor- Bond
Interest to Be Interest Amor- tized Carrying
Periods Paid Expense tization Premium Value
Issue Date
1
2
3
(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium
on December 31, 2011.
DATE ACCOUNT TITLE DEBIT CREDIT
(d) Prepare the journal entry to record the payment of interest and the amortization of the
premium on July 1, 2012, assuming no accrual of interest on June 30.
DATE ACCOUNT TITLE DEBIT CREDIT
(e) Prepare the journal entry to record the accrual of interest and the amortization of the
premium on December 31, 2012.
DATE ACCOUNT TITLE DEBIT CREDIT