National Company issued a 7.5% bond, dated January 1, 2020 with a face amount of $600,000 on
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Question:
- National Company issued a 7.5% bond, dated January 1, 2020 with a face amount of $600,000 on January 1, 2020. The bonds mature on December 31, 2026. The market yield for bonds of similar risk and maturity was 5.5%. Interest is made semiannually on June 30 and December 31.
REQUIRED:
- Determine the price of the bonds at January 1, 2020 (be certain to include all of the “Given” information as discussed in class).
- Prepare a bond amortization table using the effective interest method (as reviewed in class), and make certain to obtain totals for the columns of Cash Interest Paid, Interest Expense, and Premium Amortization.
- Prepare the journal entry to record their issuance by National Company on January 1, 2020.
- Prepare the journal entry recording the first interest payment on June 30, 2020.
- Prepare the journal entry recording the interest payment on December 31, 2020.
- Prepare journal entries at maturity on December 31, 2026.
- Prepare the journal entry to record the retirement of the bond at a call price of $640,000 on January 1, 2023.
- Instead of retirement of the bond as described in “g” above, assume the bond was retired @108 call price on January 1, 2023. Prepare the journal entry to record this retirement of the bond.
Part 2 -- Installment note:
- On January 1, 2020 National Company signed a $500,000, 7% installment note to be repaid with 8 equal annual installments to be first made on December 31, 2020, and then every December 31 thereafter.
REQUIRED:
- Determine the amount of each annual payment.
- Prepare an amortization table for this installment note (as reviewed in class).
- Prepare the journal entry for the issuance of the installment note.
- Prepare the journal entry for the first payment on the note.
Related Book For
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas
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