Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, Trueman Corp. issued $480,000 of
Question:
Analyzing and Reporting Financial Statement Effects of Bond Transactions
On January 1, Trueman Corp. issued $480,000 of 20-year, 11% bonds for $443,888, yielding a market ( yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.
a. Prepare the journal entries for transactions described above.
Date | Account | Debit | Credit |
---|---|---|---|
Jan. 1 | Answer | Answer | |
Answer | Answer | ||
Answer | Answer | ||
Jun. 30 | Answer | Answer | |
Answer | Answer | ||
Answer | Answer | ||
Dec. 31 | Answer | Answer | |
Answer | Answer | ||
Answer | Answer | ||
Note:Round your answers to the nearest whole dollar.
b. Post the journal entries to their respective T-accounts. Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account.
Cash | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer | ||
Bonds payable | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer | ||
Interest expense | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer | ||
Bond discount | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer | ||
c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value.
Date | Account | Debit | Credit |
---|---|---|---|
Dec. 31 | Bond discountBond premiumBonds payableCashFair value adjustmentGain to adjust bonds to fair valueInterest expenseInterest payableLoss to adjust bonds to fair valueRetained earningsN/A | Answer | |
Bond discountBond premiumBonds payableCashFair value adjustmentGain to adjust bonds to fair valueInterest expenseInterest payableLoss to adjust bonds to fair valueRetained earningsN/A | Answer | ||
To record fair value adjustment. |
Financial Accounting
ISBN: 978-0133472264
5th Canadian edition
Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin