Exercise 10-4 Straight-line amortization of bond premium L.O. P3
Prairie Dunes Co. issues bonds dated January 1, 2011, with a par value of $890,000. The bonds’ annual
contract rate is 12%, and interest is paid semiannually on June 30 and December 31. The bonds mature
in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for
$935,160.
1. What is the amount of the premium on these bonds at issuance? (Omit the "$" sign in your
response.)
Premium
$
2. How much total bond interest expense will be recognized over the life of these bonds? (Round your
answer to the nearest dollar amount. Omit the "$" sign in your response.)
Total bond interest expense
$
3. Prepare an amortization table for these bonds; use the straight-line method to amortize the
premium.(Make sure that the unamortized premium is adjusted to "0" and the carrying value
equals to face value of the bond in the last period. Round your intermediate calculations and
final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Semiannual
Interest
Period-End
1/01/2011
Unamortized
Premium
$
6/30/2011
12/31/2011
6/30/2012
12/31/2012
6/30/2013
12/31/2013
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Carrying
Value
$
Exercise 10-3B Effective interest amortization of bond discount L.O. P2
Welch issues bonds dated January 1, 2011, with a par value of $249,000. The bonds’ annual contract
rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three
years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $236,765.
1. What is the amount of the discount on these bonds at issuance? (Omit the "$" sign in your
response.)
Discount
$
2. How much total bond interest expense will be recognized over the life of these bonds? (Omit the "$"
sign in your response.)
Total bond interest expense
$
3. Use the effective interest method to amortize the discount for these bonds. (Make sure that the
unamortized discount equals to "0" and the Carrying value equals to face value of the bond in
the last period. Bond interest expense in the last period should be calculated as Cash interest
paid (+) Discount amortized. Round your intermediate calculations and final answers to the
nearest dollar amount. Omit the "$" sign in your response.)
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
(B)
Bond Interest
Expense
(C)
Discount
Amortization
1/01/2011
6/30/2011
$
$
$
$
$
$
$
12/31/2011
6/30/2012
12/31/2012
6/30/2013
12/31/2013
Total
(D)
Unamortized
Discount
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(E)
Carrying
Value
$
Exercise 10-9 Computing bond interest and price; recording bond issuance L.O. P2
Jester Company issues bonds with a par value of $590,000 on their stated issue date. The bonds mature
in 5 years and pay 9% annual interest in semiannual payments. On the issue date, the annual market
rate for the bonds is 12%. (Use Table B.1, Table B.3)
1. What is the amount of each semiannual interest payment for these bonds? (Omit the "$" sign in
your response.)
Semiannual interest payment
$
2. How many semiannual interest payments will be made on these bonds over their life?
Number of payments
3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a
premium.
at a premium.
at par.
at a discount.
4. Compute the price of the bonds as of their issue date. (Round "PV Factors" to 4 decimal places.
Round intermediate calculations and final answer to the nearest dollar amount. Omit the "$"
sign in your response.)
Issue price of bonds
$
5. Prepare the journal entry to record the bonds’ issuance. (Round "PV Factors" to 4 decimal places.
Round intermediate calculations and final answers to the nearest dollar amount. Omit the "$"
sign in your response.)
General Journal
(Click to select)
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Debit
Credit
Exercise 10-5B Effective interest amortization of bond premium L.O. P3
Prairie Dunes Co. issues bonds dated January 1, 2011, with a par value of $740,000. The bonds’ annual
contract rate is 13%, and interest is paid semiannually on June 30 and December 31. The bonds mature
in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for
$758,222.
Prepare an amortization table for these bonds using the effective interest method to amortize the
premium.(Make sure that the unamortized premium equals to '0' and the Carrying value equals to
face value of the bond in the last period. Bond interest expense in the last period should be
calculated as Cash interest paid (−) Premium amortized. Round your intermediate calculations
and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
(B)
Bond Interest
Expense
(C)
Premium
Amortization
1/01/2011
6/30/2011
$
$
$
$
$
$
$
12/31/2011
6/30/2012
12/31/2012
6/30/2013
12/31/2013
Total
(D)
Unamortized
Premium
(E)
Carrying
Value
$
Exercise 10-1 Recording bond issuance and interest L.O. P1
On January 1, 2011, Kidman Enterprises issues bonds that have a $1,300,000 par value, mature in 20
years, and pay 7% interest semiannually on June 30 and December 31. The bonds are sold at par.
1. How much interest will Kidman pay (in cash) to the bondholders every six months? (Do not round
intermediate calculations. Omit the "$" sign in your response.)
Semiannual cash interest payment
$
2. Prepare journal entries for the following.
(a) The issuance of bonds on January 1, 2011. (Omit the "$" sign in your response.)
Date
Jan. 1, 2011
General Journal
Debit
Credit
(Click to select)
(Click to select)
(b) The first interest payment on June 30, 2011. (Do not round intermediate calculations. Omit the
"$" sign in your response.)
Date
June 30, 2011
General Journal
Debit
Credit
(Click to select)
(Click to select)
(c) The second interest payment on December 31, 2011. (Do not round intermediate
calculations. Omit the "$" sign in your response.)
Date
Dec. 31, 2011
General Journal
Debit
Credit
Debit
Credit
Debit
Credit
(Click to select)
(Click to select)
3. Prepare the journal entry for issuance of bonds assuming.
(a) The bonds are issued at 96. (Omit the "$" sign in your response.)
Date
General Journal
Jan. 1, 2011
(Click to select)
(b) The bonds are issued at 104. (Omit the "$" sign in your response.)
Date
Jan. 1, 2011
General Journal
(Click to select)
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Exercise 10-15 Installment note entries L.O. P5
On January 1, 2011, Randa borrows $21,000 cash by signing a four-year, 5% installment note. The note
requires four equal total payments of accrued interest and principal on December 31 of each year from
2011 through 2014. (Use Table B.3)
Prepare the journal entries for Randa to record the loan on January 1, 2011, and the four payments from
December 31, 2011, through December 31, 2014. (Round "PV Factor" to 4 decimal places and final
answers to the nearest dollar amount. Omit the "$" sign in your response.)
Date
Jan. 1, 2011
General Journal
(Click to select)
(Click to select)
Dec. 31, 2011
(Click to select)
Dec. 31, 2012
(Click to select)
Dec. 31, 2013
(Click to select)
Dec. 31, 2014
(Click to select)
Debit
Credit
Problem 10-1A Computing bond price and recording issuance L.O. P1, P2, P3
Stowers Research issues bonds dated January 1, 2011, that pay interest semiannually on June 30 and
December 31. The bonds have a $30,000 par value and an annual contract rate of 10%, and they mature
in 10 years.
Required:
Consider each of the following three separate situations. (Use Table B.1, Table B.3)
1. The market rate at the date of issuance is 8%.
(a) Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places,
intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in
your response.)
Issue price
$
(b) Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places,
intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in
your response.)
Date
Jan. 1
General Journal
Debit
Credit
(Click to select)
2. The market rate at the date of issuance is 10%.
(a) Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places,
intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in
your response.)
Issue price
$
(b) Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places,
intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in
your response.)
Date
Jan. 1
General Journal
Debit
Credit
(Click to select)
(Click to select)
3. The market rate at the date of issuance is 12%.
(a) Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places,
intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in
your response.)
Issue price
$
(b) Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places,
intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in
your response.)
Date
General Journal
Debit
Credit
Jan. 1
(Click to select)
Problem 10-2A Straight-line amortization of bond discount L.O. P1, P2
Heathrow issues $1,600,000 of 9%, 15-year bonds dated January 1, 2011, that pay interest semiannually
on June 30 and December 31. The bonds are issued at a price of $1,382,579.
Required:
1. Prepare the January 1, 2011, journal entry to record the bonds’ issuance. (Omit the "$" sign in your
response.)
Date
General Journal
Debit
Credit
Jan. 1
(Click to select)
2(a) For each semiannual period, compute the cash payment. (Omit the "$" sign in your response.)
Cash payment
$
2(b) For each semiannual period, compute the the straight-line discount amortization. (Round your
answer to the nearest dollar amount. Omit the "$" sign in your response.)
Amount of discount amortization
$
2(c) For each semiannual period, compute the bond interest expense. (Round your intermediate
calculations and final answer to the nearest dollar amount. Omit the "$" sign in your
response.)
Bond interest expense
$
3. Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "$" sign
in your response.)
Total bond interest expense
$
4. Prepare the first two years of an amortization table using the straight-line method. (Round your
intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in
your response. Omit the "$" sign in your response.)
Semiannual
Period-End
1/01/2011
Unamortized
Discount
$
Carrying
Value
$
6/30/2011
12/31/2011
6/30/2012
12/31/2012
5. Prepare the journal entries to record the first two interest payments. (Round your intermediate
calculations and final answers to the nearest dollar amount. Omit the "$" sign in your
response.)
Date
General Journal
June 30
(Click to select)
Dec. 31
(Click to select)
Debit
Credit
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Problem 10-3A Straight-line amortization of bond premium L.O. P1, P3
Heathrow issues $1,900,000 of 5%, 15-year bonds dated January 1, 2011, that pay interest semiannually
on June 30 and December 31. The bonds are issued at a price of $2,325,594.
Required:
1. Prepare the January 1, 2011, journal entry to record the bonds’ issuance. (Omit the "$" sign in your
response.)
Date
Jan. 1
General Journal
Debit
Credit
(Click to select)
2(a) For each semiannual period, compute the cash payment. (Omit the "$" sign in your response.)
Cash payment
$
2(b) For each semiannual period, compute the the straight-line premium amortization. (Round your
answer to the nearest dollar amount. Omit the "$" sign in your response.)
Amount of premium amortized
$
2(c) For each semiannual period, compute the the bond interest expense. (Omit the "$" sign in your
response.)
Bond interest expense
$
3. Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "$" sign
in your response.)
Total bond interest expense
$
4. Prepare the first two years of an amortization table using the straight-line method. (Omit the "$" sign
in your response.)
Semiannual
Period-End
1/01/2011
Unamortized
Premium
$
Carrying
Value
$
6/30/2011
12/31/2011
6/30/2012
12/31/2012
5. Prepare the journal entries to record the first two interest payments. (Omit the "$" sign in your
response.)
Date
General Journal
Debit
Credit
June 30
(Click to select)
Dec. 31
(Click to select)
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Problem 10-6A Straight-line amortization of bond discount L.O. P1, P2
[The following information applies to the questions displayed below.]
Patton issues $590,000 of 7.5%, four-year bonds dated January 1, 2011, that pay interest semiannually
on June 30 and December 31. They are issued at $542,310 and their market rate is 10% at the issue
date.
references
10.
value:
10.00 points
Problem 10-6A Part 1
1. Prepare the January 1, 2011, journal entry to record the bonds' issuance. (Omit the "$" sign in your
response.)
Date
General Journal
Debit
Credit
Jan. 1
(Click to select)
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11.
value:
10.00 points
Problem 10-6A Part 2
2. Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "$" sign
in your response.)
Total bond interest expense
$
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12.
value:
10.00 points
Problem 10-6A Part 3
3. Prepare a straight-line amortization table for the bonds' first two years. (Make sure that the
unamortized discount is adjusted to "0" and the carrying value equals to face value of the
bond in the last period. Round your intermediate calculations and final answers to the nearest
dollar amount. Omit the "$" sign in your response.)
Semiannual
Interest Period-End
Unamortized
Discount
1/01/2011
$
Carrying
Value
$
6/30/2011
12/31/2011
6/30/2012
12/31/2012
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13.
value:
10.00 points
Problem 10-6A Part 4
4. Prepare the journal entries to record the first two interest payments. (Round your intermediate
calculations and final answers to the nearest dollar amount. Omit the "$" sign in your
response.)
Date
General Journal
June 30
(Click to select)
Dec. 31
(Click to select)
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Debit
Credit