Financial and Managerial Accounting: P13-2A Atlantis Inc. produces and sells voltage regulators

Financial and Managerial Accounting 
PROBLEM 13-2A Present value; bond premium; entries for bonds payable transactions 
Atlantis Inc. produces and sells voltage regulators. On July 1, 2007, Atlantis Inc. issued $800,000 of 10-year, 14% bonds at an effective interest rate of 13%. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. For compound entries, leave those boxes that do not require an entry BLANK. For a compound transaction, accounts should be listed largest to smallest. 

Instructions: 
1. Journalize the entry to record the amount of the cash proceeds from the sale of the bonds. Use the tables of present values in Appendix A to compute the cash proceeds, rounding to the nearest dollar. 
2. Journalize the entries to record the following: 
a. The first semiannual interest payment on December 31, 2007, including the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) 
b. The interest payment on June 30, 2008, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) 
3. Determine the total interest expense for 2007. 
4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? Explain.
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