On December 31, 2020, Almonte Corporation borrowed $100,000 by signing a 12% note that is to be repaid in 5 annual fixed principal repayments, the first of which is due on December 31, 2022.

REQUIRED:

(a) a journal entry to record the initial borrowing of the money.

(b) Assume that the payments are to consist of accrued interest plus fixed principal payments. Prepare general journal entries to record the first and second installment payments.

(c) What amount should be shown as a current liability at December 31, 2022?

(d) What amount should be shown as a long-term liability at December 31, 2022?

(e) Contrary to the assumption in (b) above, assume now that the note requires blended installment payments of $27,741. Prepare the general journal entry to record the first installment payment.

PART 2 (16 marks):

On December 31, 2021, when the market rate was 10%, West End Corp. issued $5,000,000, 12%, 5-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were issued for $5,386,087, and the corporation uses the effective interest method of amortizing any bond premium or discount.

REQUIRED:

(a) Complete the amortization table below for the first two periods only. (USE EXCEL TEMPLATE TO COMPLETE YOUR ANSWER)

Period ending	Cash interest paid	Interest expense	Premium/ Discount Amortization	Carrying value
Dec. 31/21
June 30/22
Dec. 31/22

(b) Prepare the journal entries to record the issue of the bonds and the first

interest payment.

(c) West End Corp. retires its bonds on December 31, 2025 for cash of

$5,090,000. At that date the bonds have a carrying value of $5,092,971.

Prepare the journal entry to retire the bonds on December 31, 2025.

Answer rating: 100% (QA)

Part 1 a Journal entry to record the initial borrowing of the money Debit Cash 100000 Credit Notes P... View the full answer