Mahalo Boat Adventure Inc. has a July 31 year-end. It showed the following partial amortization schedules regarding
Question:
Mahalo Boat Adventure Inc. has a July 31 year-end. It showed the following partial amortization schedules regarding two bond issues:
Bond Issue A
Period Ending | (A) Cash Interest Paid $720,000 × 10.0% × 6/12 | (B) Period Interest Expense (E) × 9.0% × 6/12 | (C) Amort. (A) − (B) | (D) Unamortized Balance | (E) Carrying Value $720,000 + (D) | ||||||||||||||||||||
June 1/23 | $ | 43,776 | $ | 763,776 | |||||||||||||||||||||
Dec. 1/23 | $ | 36,000 | $ | 34,370 | $ | 1,630 | 42,146 | 762,146 | |||||||||||||||||
⋮ | ⋮ | ⋮ | ⋮ | ⋮ | ⋮ | ||||||||||||||||||||
Dec. 1/29 | 36,000 | 33,236 | 2,764 | 15,807 | 735,807 | ||||||||||||||||||||
June 1/30 | 36,000 | 33,111 | 2,889 | 12,918 | 732,918 | ||||||||||||||||||||
Dec. 1/30 | 36,000 | 32,981 | 3,019 | 9,899 | 729,899 | ||||||||||||||||||||
June 1/31 | 36,000 | 32,845 | 3,155 | 6,744 | 726,744 | ||||||||||||||||||||
Dec. 1/31 | 36,000 | 32,703 | 3,297 | 3,447 | 723,447 | ||||||||||||||||||||
June 1/32 | 36,000 | 32,553 | 3,447 | 0 | 720,000 | ||||||||||||||||||||
Totals | $ | 648,000 | $ | 604,224 | $ | 43,776 | |||||||||||||||||||
*Adjusted for rounding
(For all requirements, do not round intermediate calculations. Round the final answers to the nearest whole dollar.)
Required:
1. Bond Issue A
a. Were the bond A issued at a premium and/or discount?
What is the term of bond A issue?
Show how bond A would appear on the balance sheet under non-current liabilities at July 31, 2029. (Enter all amounts as positive values.)
Calculate the total bond A interest expense that would appear on the income statement for the year ended July 31, 2030.
Independent of (a) through (g), assume bond A issues were retired on December 1, 2030, at 97. Record the entries
1. Record the payment of interest on bonds.
Record the payment of interest on bonds.
Record the retired bonds.
Bond Issue B
*Adjusted for roundingPeriod Ending (A)
Cash
Interest Paid
$580,000.0 ×
10.0% × 3/12(B)
Period
Interest
Expense
(E) × 10.5% × 3/12(C)
Amort.
(A) − (B)(D)
Unamortized
Balance(E)
Carrying
Value
$580,000 − (D)Apr. 1/21 $ 17,822 $ 562,178 Jul. 1/21 $ 14,500 $ 14,757 $ 257 17,565 562,435 ⋮ ⋮ ⋮ ⋮ ⋮ ⋮ Apr. 1/29 14,500 15,074 574 5,172 574,828 Jul. 1/29 14,500 15,089 589 4,583 575,417 Oct. 1/29 14,500 15,105 605 3,978 576,022 Jan. 1/30 14,500 15,121 621 3,357 576,643 Apr. 1/30 14,500 15,137 637 2,720 577,280 Jul. 1/30 14,500 15,154 654 2,066 577,934 Oct. 1/30 14,500 15,171 671 1,395 578,605 Jan. 1/31 14,500 15,188 688 707 579,293 Apr. 1/31 14,500 15,207 * 707 0 580,000 Totals $ 580,000 $ 597,822 $ 17,822
2. Bond Issue B
b. Journalize the issuance of bond B on April 1, 2021.
a. Were the bond B issued at a premium and/or discount?- What is the contract interest rate for the issue bond B?
Interest of how much is paid how often for bond B issued? - What is the term of bond B issue?
- Show how bond B would appear on the balance sheet under non-current liabilities at July 31, 2029.
Calculate the bond B interest expense that would appear on the income statement for the year ended July 31, 2030.
Independent of (a) through (g), assume that bond B issues was retired on December 1, 2030, at 97. Record the entries. 1 Record the interest paid on bonds.
2
Record the retired bonds.
Fundamental Accounting Principles Volume II
ISBN: 978-1259066511
14th Canadian Edition
Authors: Larson Kermit, Jensen Tilly