Bonds Payable_Issue at premium_Interest payment_Redemption (6 questions)

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Description

E10-9 Northeast
Airlines is considering two alternatives for the financing of a purchase of a
fleet of airplanes.

These two
alternatives are:

1. Issue 60,000
shares of common stock at $45 per share. (Cash dividends have not been paid
nor is the payment of

any contemplated.)

2.Issue 10%,
10-year bonds at par for $2,700,000.

It is estimated that the company will
earn $800,000 before interest and taxes as a result of this purchase.

The company has an estimated tax rate of
30% and has 90,000 shares of common stock outstanding prior to the

new financing.

Instructions

Determine the
effect on net income and earnings per share for these two methods of
financing.

E10-10 On January
1, Neuer Company issued $500,000, 10%, 10-year bonds at par. Interest is

payable
semiannually on July 1 and January 1.

Instructions

Present journal
entries to record the following.

(a)The issuance of
the bonds.

(b)The payment of
interest on July 1, assuming that interest was not accrued on June 30.

(c)The accrual of
interest on December 31

E10-11 On January
1, Flory Company issued $300,000, 8%, 5-year bonds at face value.

Interest is
payable semiannually on July 1 and January 1.

Instructions

Prepare journal
entries to record the following events.

(a)The issuance of
the bonds.

(b)The payment of
interest on July 1, assuming no previous accrual of interest.

(c)The accrual of
interest on December 31.

E10-15 Leoni Co.
receives $240,000 when it issues a $240,000, 10%, mortgage note payable to

finance the
construction of a building at December 31, 2011. The terms provide for
semiannual

installment
payments of $20,000 on June 30 and December 31.

Instructions

Prepare the
journal entries to record the mortgage loan and the first two installment
payments.

*E10-18 Hrabik
Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for

$562,613.This
price resulted in an effective-interest rate of 10% on the bonds. Interest is
payable

semiannually on
July 1 and January 1. Hrabik uses the effective-interest method to amortize

bond premium or
discount.

Instructions

Prepare the
journal entries to record the following. (Round to the nearest dollar.)

(a)The issuance of
the bonds.

(b)The payment of
interest and the discount amortization on July 1, 2011, assuming that
interest

was not accrued
on June 30.

(c)The accrual of
interest and the discount amortization on December 31, 2011.

*P10-8A Soprano
Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2011. The bonds

were dated
January 1 and pay interest July 1 and January 1. Soprano Electric uses the
straightline

method to
amortize bond premium or discount. The bonds were sold at 104. Assume no

interest is
accrued on June 30.

Instructions

(a)Prepare the
journal entry to record the issuance of the bonds on January 1, 2011.

(b)Prepare a bond
premium amortization schedule for the first 4 interest periods.

(c)Prepare the
journal entries for interest and the amortization of the premium in 2011 and

2012.

(d)Show the balance
sheet presentation of the bond liability at December 31, 2012.

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