2 1 . On April 1 , YR 0 1 , Kroger Inc. issued $ 1 0...
Question:
On April YR Kroger Inc. issued $ of twoyear term bonds payable for These bonds are dated
February YR mature on August of YRa planned term of months and pay interest on February and August
The companys yearend is December its operating cycle is days, and financial statements are prepared in accordance
with GAAP. Key accounting policies for bonds payable include:
At the monthend just before an interest payment is due, the company makes an adjusting journal entry AJE to bring the
Accrued Interest Payable account to the amount due for payment. In the case of these bonds, the AJE is recorded at
January st and July st
Amortization of discount or premium is recorded: a at yearend and b on any date that bonds are retired.
Bond discount or premium net of issuance costs is amortized on a straightline basis.
If bonds are retired on a noninterest payment date, only the interest for the retired bonds is accrued. Interest for the bonds
that are not retired is accrued using the companys normal accounting procedures.
Adjusting journal entries AJE are recorded at yearend December st and reversing journal entries RJE are recorded
on the first day of the new year January st
On YR all general ledger accounts related to bonds payable had a balance of zero
Required:
Prepare formal journal entries for the transactions listed below. For convenience, round all final answers to the nearest dollar
do not round intermediate calculations
Date Description of Transaction
YR Issued $ of bonds payable for These bonds are dated February YR mature on
August YRa planned term of months and pay interest on February and August
YR Received and paid a billing from the underwriter who placed sold the bond issue. The underwriters fee totaled
$
YR Accrued interest on the bonds payable.
YR Paid the interest due on the bonds payable.
YR Made all necessary adjusting journal entries AJE required under GAAP.
YR Recorded reversing journal entries RJE
YR Accrued interest on the bonds payable.
YR Paid the interest due on the bonds payable.
YR Purchased bonds payable with a face value of $ for paid a related brokers fee of $ and retired the
bonds. These bonds were originally issued on April YR Per the bond indenture agreement, interest on the
bonds was paid at the retirement date.
YR Accrued interest on the bonds payable.
YR Paid the interest due on the bonds payable.
YR Recorded the retirement of the remaining $ of bonds payable. The retirement of the bonds was managed
by the bond trustee an investment bank The company paid the bond trustee cash of $ for the bonds and
cash of $ as an administrative fee.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill