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Q QS 14-1 Bond features and terminology L.O. A2
Select the phrase that best fits each term of the description A through H .
Description Items
A. Records and tracks the bondholders’ names.
B. Is unsecured; backed only by the issuer’s credit standing.
C. Has varying maturity dates for amounts owed.
D. Identifies rights and responsibilities of the issuer and the bondholders.
E. Can be exchanged for shares of the issuer’s stock.
F. Is unregistered; interest is paid to whoever possesses them.
G. Maintains a separate asset account from which bondholders are paid at maturity.
H. Pledges specific assets of the issuer as collateral.
QS 14-2 Bond computations-straight-line L.O. P1, P2
Alberto Company issues 8%, 10-year bonds with a par value of $350,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87½. The straight-line method is used to allocate interest expense.
1.
What are the issuer’s cash proceeds from issuance of these bonds? (Omit the “$” sign in your response.)
Cash proceeds $
2.
What total amount of bond interest expense will be recognized over the life of these bonds? (Omit the “$” sign in your response.)
Total bond interest expense $
3.
What is the amount of bond interest expense recorded on the first interest payment date? (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
Bond interest expense $
QS 14-3B Bond computations-effective interest L.O. P1, P3
Sanchez Company issues 10%, 15-year bonds with a par value of $120,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117¼. The effective interest method is used to allocate interest expense.
1.
What are the issuer’s cash proceeds from issuance of these bonds? (Omit the “$” sign in your response.)
Cash proceeds $
2.
What total amount of bond interest expense will be recognized over the life of these bonds? (Omit the “$” sign in your response.)
Total bond interest expense $
3.
What amount of bond interest expense is recorded on the first interest payment date? (Omit the “$” sign in your response.)
Bond interest expense $
eBook Links (2) references
QS 14-4 Journalize bond issuance L.O.P1
Prepare the journal entries for the issuance of the bonds. Assume that both bonds are issued for cash on January 1, 2011.
1.
Alberto Company issues 8%, 10-year bonds with a par value of $350,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87½. The straight-line method is used to allocate interest expense. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
Jan. 1, 2011
2.
Sanchez Company issues 10%, 15-year bonds with a par value of $120,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117¼. The effective interest method is used to allocate interest expense. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
Jan. 1, 2011
QS 14-6 Recording bond issuance and discount amortization L.O. P1, P2
Bellvue Company issues 10%, five-year bonds, on December 31, 2010, with a par value of $100,000 and semiannual interest payments.
Semiannual Period-End Unamortized Discount Carrying Value
(0) 12/31/2010 $ 7,360 $ 92,640
(1) 6/30/2011 6,624 93,376
(2) 12/31/2011 5,888 94,112
Use the above straight-line bond amortization table and prepare journal entries to record the following.
(a)
The issuance of bonds on December 31, 2010. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
Dec. 31
(b)
The first interest payment on June 30, 2011. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
June 30
(c) The second interest payment on December 31, 2011. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
Dec. 31
QS 14-7 Bond retirement by call option L.O. P4
On July 1, 2011, Jackson Company exercises a $5,000 call option (plus par value) on its outstanding bonds that have a carrying value of $208,000 and par value of $200,000. The company exercises the call option after the semiannual interest is paid on June 30, 2011.
Record the entry to retire the bonds. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
July 1, 2011
QS 14-12D Recording operating leases L.O. C4
Lauren Wright, an employee of ETrain.com, leases a car at O’Hare airport for a three-day business trip. The rental cost is $350. Prepare the entry by ETrain.com to record Lauren’s short-term car lease cost. (Omit the “$” sign in your response.)
General Journal Debit Credit
QS 14-13D Recording capital leases L.O. C4
Juicyfruit, Inc., signs a five-year lease for office equipment with Office Solutions. The present value of the lease payments is $20,859. Prepare the journal entry that Juicyfruit records at the inception of this capital lease. (Omit the “$” sign in your response.)
General Journal Debit Credit
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