Exam 3 Review Handout Chapter 10: Reporting & Analyzing Liabilities 1. On January 1, 2015 James Bond & Company issued 5-year bonds with a face value of $500,000. The bonds carry a stated interest rate of 7%. The straight-line method is used to amortize premiums & discounts. a. Prepare the journal entry for the issuance assuming the bonds are issued at 97 Was the market interest rate higher or lower than the stated interest at issue? Prepare the adjusting journal entry at December 31, 2015 if interest is payable on December 31 iii. Prepare the adjusting journal entry at December 31, 2015 if interest is payable on January 1, 2016 b. Prepare the journal entry for the issuance assuming the bonds are issued at 102. Was the market interest rate higher or lower than the stated interest at issue? Prepare the adjusting journal entry at December 31, 2015 if interest is payable on December 31. iii. Prepare the adjusting journal entry at December 31, 2015 if interest is payable on January 1, 2016. iv. Prepare the journal entry at maturity assuming that interest has been accrued and paid. 2. Record journal entries for the following transactions concerning current & long-term liabilities at Lubar Corp. a. On January 1, 2015 the corporation acquired a building by signing an $800,000, 10%, 5- year mortgage note payable. The terms provide for yearly installment payments of $211,038 on December 31. b. On January 1, 2015 the corporation issued a $400,000, 11%, 10-year bond at 110 with interest payable on December 31. The straight-line method is used to amortize the bond premium. c. On December 31, the corporation issued a $300,000, 9%, 5-year bond at 97 with interest payable on December 31 (starting in 2016). The straight-line method is used to amortize the bond discount. d. Record the necessary adjusting journal entries at December 31, 2015 for items "a" and e. Prepare the liabilities section of the balance sheet as of as of December 31, 2015 for items "a" and "b