Bonds Payable_Issue and Redemption_Eight questions

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Description

Q QS 14-1 Bond features and
terminology L.O. A2
Select
the phrase that best fits each term of the description A through H .

Description
Items
A.
Records and tracks the bondholders’ names.
B. Is
unsecured; backed only by the issuer’s credit standing.
C. Has
varying maturity dates for amounts owed.
D.
Identifies rights and responsibilities of the issuer and the bondholders.
E. Can
be exchanged for shares of the issuer’s stock.
F. Is
unregistered; interest is paid to whoever possesses them.
G.
Maintains a separate asset account from which bondholders are paid at maturity.

H.
Pledges specific assets of the issuer as collateral.

QS
14-2 Bond computations-straight-line L.O. P1, P2
Alberto
Company issues 8%, 10-year bonds with a par value of $350,000 and semiannual
interest payments. On the issue date, the annual market rate for these bonds is
10%, which implies a selling price of 87½. The straight-line method is used to
allocate interest expense.

1.
What
are the issuer’s cash proceeds from issuance of these bonds? (Omit the
“$” sign in your response.)

Cash
proceeds $

2.
What
total amount of bond interest expense will be recognized over the life of these
bonds? (Omit the “$” sign in your response.)

Total
bond interest expense $

3.
What
is the amount of bond interest expense recorded on the first interest payment
date? (Round your answer to the nearest dollar amount. Omit the “$”
sign in your response.)

Bond
interest expense $

QS
14-3B Bond computations-effective interest L.O. P1, P3
Sanchez
Company issues 10%, 15-year bonds with a par value of $120,000 and semiannual
interest payments. On the issue date, the annual market rate for these bonds is
8%, which implies a selling price of 117¼. The effective interest method is
used to allocate interest expense.

1.
What
are the issuer’s cash proceeds from issuance of these bonds? (Omit the
“$” sign in your response.)

Cash proceeds
$

2.
What
total amount of bond interest expense will be recognized over the life of these
bonds? (Omit the “$” sign in your response.)

Total
bond interest expense $

3.
What
amount of bond interest expense is recorded on the first interest payment date?
(Omit the “$” sign in your response.)

Bond
interest expense $
eBook
Links (2) references

QS
14-4 Journalize bond issuance L.O.P1
Prepare
the journal entries for the issuance of the bonds. Assume that both bonds are
issued for cash on January 1, 2011.

1.
Alberto
Company issues 8%, 10-year bonds with a par value of $350,000 and semiannual
interest payments. On the issue date, the annual market rate for these bonds is
10%, which implies a selling price of 87½. The straight-line method is used to
allocate interest expense. (Omit the “$” sign in your response.)

Date
General Journal Debit Credit
Jan.
1, 2011

2.
Sanchez
Company issues 10%, 15-year bonds with a par value of $120,000 and semiannual
interest payments. On the issue date, the annual market rate for these bonds is
8%, which implies a selling price of 117¼. The effective interest method is
used to allocate interest expense. (Omit the “$” sign in your
response.)

Date
General Journal Debit Credit
Jan.
1, 2011

QS 14-6 Recording bond
issuance and discount amortization L.O. P1, P2
Bellvue
Company issues 10%, five-year bonds, on December 31, 2010, with a par value of
$100,000 and semiannual interest payments.

Semiannual
Period-End Unamortized Discount Carrying Value
(0)
12/31/2010 $ 7,360 $ 92,640
(1)
6/30/2011 6,624 93,376
(2)
12/31/2011 5,888 94,112

Use
the above straight-line bond amortization table and prepare journal entries to
record the following.

(a)
The
issuance of bonds on December 31, 2010. (Omit the “$” sign in your
response.)

Date
General Journal Debit Credit
Dec.
31

(b)
The
first interest payment on June 30, 2011. (Omit the “$” sign in your
response.)

Date
General Journal Debit Credit
June
30

(c)
The second interest payment on December 31, 2011. (Omit the “$” sign
in your response.)

Date
General Journal Debit Credit
Dec.
31

QS
14-7 Bond retirement by call option L.O. P4
On
July 1, 2011, Jackson Company exercises a $5,000 call option (plus par value)
on its outstanding bonds that have a carrying value of $208,000 and par value
of $200,000. The company exercises the call option after the semiannual
interest is paid on June 30, 2011.

Record
the entry to retire the bonds. (Omit the “$” sign in your response.)

Date
General Journal Debit Credit
July
1, 2011

QS
14-12D Recording operating leases L.O. C4
Lauren
Wright, an employee of ETrain.com, leases a car at O’Hare airport for a
three-day business trip. The rental cost is $350. Prepare the entry by
ETrain.com to record Lauren’s short-term car lease cost. (Omit the
“$” sign in your response.)

General
Journal Debit Credit

QS
14-13D Recording capital leases L.O. C4
Juicyfruit,
Inc., signs a five-year lease for office equipment with Office Solutions. The
present value of the lease payments is $20,859. Prepare the journal entry that
Juicyfruit records at the inception of this capital lease. (Omit the
“$” sign in your response.)

General
Journal Debit Credit

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