Question: Klamath Manufacturing sold 20-year bonds with a total face amount of $1,000,000 and a stated rate of 7.5 percent. The bonds sold for $1,080,000 on

Klamath Manufacturing sold 20-year bonds with a total face amount of $1,000,000 and a stated rate of 7.5 percent. The bonds sold for $1,080,000 on December 31, 2011, and pay interest semiannually on June 30 and December 31.

Required:
1. Prepare the entry to recognize the sale of the bonds.
2. Determine the amount of the semiannual interest payment required by the bonds.
3. Prepare the journal entry made by Klamath at June 30, 2012, to recognize the interest expense and an interest payment.
4. Determine the amount of interest expense for 2012.
5. If Klamath issued bonds with a variable interest rate, would you expect the rate to increase, decrease, or stay the same? Why?
6. What should Klamath consider in deciding whether to use a fixed or variable rate?

Step by Step Solution

★★★★★

3.36 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Journal Date Account and Explanation Debit Credit 1 2011 Dec 31 Cash 1080000 Premium ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

563-B-A-L (6066).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

During the month of May 20--, The General's Favorite Fishing Hole engaged in the following transactions. These transactions required an expansion of the chart of accounts as shown below. May 1 In...

On December 31, 2011, Harrington Corporation sold $425,000 of 15-year, 11 percent bonds. The bonds sold for $395,000 and pay interest semiannually on June 30 and December 31. Required: 1. Prepare the...

Sondrini Corporation sold $1,500,000 face value of bonds at 103 on December 31, 2011. These bonds have an 8 percent stated rate and mature in four years. Interest is payable on June 30 and December...

Thornwood Lanes bought a service vehicle for $25,000 by issuing a 6 percent installment note on December 31, 2012. Thornwood will make 12 monthly payments of $2,151.66 at the end of each month....

question 1 please ans Exercise 9-51 (Algorithmic) Interest Payments and Interest Expense for Bonds (Straight Line) Klamath Manufacturing sold 20-year bonds with a total face amount of $365,000 and a...

Klamath Manufacturing sold 10-year bonds with a total face amount of $400,000 and a stated rate of 8.4 percent. The bonds sold for $424,000 on December 31, 2008, and pay interest semiannually on June...

kindly ans please thanks Completing a Debt Amortization Table (Straight line) Cagney Company sold $251,000 of bonds on December 31, 2011. A portion of the amortization table appears below. Period...

Exercise 9-51 (Algorithmic) Interest Payments and Interest Expense for Bonds (Straight Line) Klamath Manufacturing sold 20-year bonds with a total face amount of $365,000 and a stated rate of 7.5...

Klamath Manufacturing sold 20-year bonds with a total face amount of $439,000 and a stated rate of 7.5%. The bonds sold for $463,000 on January 1, 2020, and pay interest semiannually on June 30 and...

Exercise 9-70 (Algorithmic) Interest Payments and Interest Expense for Bonds (Straight Line) Klamath Manufacturing sold 20-year bonds with a total face amount of $394,000 and a stated rate of 7.5%....

Exercise 9-70 (Algorithmic) Interest Payments and Interest Expense for Bonds (Straight Line) Klamath Manufacturing sold 20-year bonds with a total face amount of 5433,000 and a stated rate of 7.5%....

Which of the following matters are to be included in an audit engagement letter? A. The terms and scope of the audit B. Confirmation that the auditor is independent C. The responsibilities of the...

1 = 9. Let Y,, Yn be iid random sample from fy (0) e-u/0,y > 0. Given that E(Y) = 0 and Var(Y) = 0. Find the MSE(mom). (Hint: There is almost no computation in this question. Just need to apply...

If ending inventory on December 3 1 , 2 0 1 6 , is overstated, then: Question 8 options: a ) gross margin for the year ended December 3 1 , 2 0 1 6 , will be understated b ) gross margin for the year...

The following salaried employees of Mountain Stone Brewery in Fort Collins, Colorado, are paid semimonthly. Some employees have union dues or garnishments deducted from their pay. Required: Calculate...

For the reaction below: CHy-H OH H-OH a. Estimate the gas phase enthalpy change using bond dissociation enthalpies from the OWL Table Reference, not data from your text. Click the References button...

David owns a concrete mixing business (sole proprietorship), which nets $200,000 in Year 1 and is expected to grow by $10000/year in each of the next 5 years. Assume his exemptions and deductions are...

ABC Company produces a chemical. At the start of the year, they had the following cost information: Direct material: (10 pounds @ $1.60) $16.00 Direct labor: (0.75 hours @ $18.00) $13.50 Variable...

A pool player's performance is measured based on how many balls are made into a pocket during a game. Then, a weighted average is used. Weekly games are weighed less than games in tournaments are....

Explain the role strategy plays in marketing communications, using the Cadbury case to illustrate your points.

Whirlmore, Inc., manufactures and sells washers and dryers through three divisions: Home-Supreme, Apartment, and International. Each division is evaluated as a profit center. Data for each division...

VSOP, Inc., has a number of divisions that produce liquors, malt beverages, and glassware. The Glassware Division manufactures a variety of bottles that can be sold externally (to soft-drink and...

Auto-Lite Manufacturing, Inc., has a division in the United States that produces a variety of headlamps and interior light packages for automobiles. One type of headlamp for compact cars is...

Cam you please hand write. please i need the answers 13) A loan of $5,600 with an interest rate of 14% compounded annually can be repaid in 3 equal annual payments of $2,412.10. Complete the...

roblem_sets/34422 Category Prior year Current year Accounts payable 41,400 45,000 Accounts receivable 115,200 122,400 Accruals 16,200 13,500 Additional paid in capital 200,000 216,660 Cash ??? ???...

Amber Company is considering a one-year project that requires an initial investment of $500,000 However, to raise this capital, the company will incur flotation costs that are 2% of the initial...