Financial and Managerial Accounting: PR14-2A On July 1, 2010, Brower Industries Inc. issued

Financial and Managerial Accounting
PR14-2A Bond discount, entries for bonds payable transactions
On July 1, 2010, Brower Industries Inc. issued $32,000,000 of 10-year, 12% bonds at a market (effective) interest rate of 13%, receiving cash of $30,237,139. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.Instructions:
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".
2. Journalize the entries to record the following: (For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".)
a.The first semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
b.The interest payment on June 30, 2011, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expenses for 2010.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
5. (Appendix 1) Compute the price of $30,237,139 received for the bonds by using the tables of present value in Appendix A at the end of text. (Round to the nearest dollar)
 
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