Wide Angle Bhd is constructing a new office building at a cost of RM2 million. When building
Question:
Wide Angle Bhd is constructing a new office building at a cost of RM2 million. When building is in the final stage of completion Wide Angle Bhd faces financial difficulties as the company needs a fund amounted RM450,000 to complete the construction. The management team of Wide Angle Bhd decides to issue bonds instead of shares since that is a way to raise capital without diluting the current shareholders' equity. The RM450,000 of 8%, 5-year bonds were issued on 1 January 2019 and pay interest semi-annually on each 1 January and 1 July, which the payment is starting on July 2019. The market rate of bonds yield 6%. The financial year ends on 30 September. Wide Angle Bhd uses the effective interest method to amortize bond premium or discount (
REQUIRED:
(a) Prepare the journal entry to record the issuance of the bonds on 1 January 2019
(b) Prepare the journal entry to record the related transactions of bonds on 1 July 2019 and 30 September 2019
(c) Assume that Wide Angle Bhd was unable to sell the bonds dated 1 January 2019 until 1 March 2019, two months after they are dated. Explain the accounting treatment to record issuance of the bonds between interest date and interest expenses on 1 July 2019.
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain