Sansen Inc. is planning to issue $5,000,000, 8-year, 4% bonds. Interest is payable semiannually each June 30
Question:
Sansen Inc. is planning to issue $5,000,000, 8-year, 4% bonds. Interest is payable semiannually each June 30 and December 31. All of the bonds will be sold on July 1, 2014; they mature on June 30, 2022. Sansen's year-end is December 31.
Requirements
1. Compute the issue (sale) price on July 1, 2014, if the yield is:
(a) 4%
(b) 6%
(c) 2%
2. Prepare all journal entries for the above three cases in 2014.
3. Prepare all journal entries for the above three cases in 2015 using the effective interest method.
4. Show how the bond interest expense and the bonds payable, for each case, should be reported on the annual financial statements for 2014 and 2015.
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Financial Accounting
ISBN: 978-0132889711
1st Canadian Edition
Authors: Jeffrey Waybright, Liang Hsuan Chen, Rhonda Pyper