1) On January 1, 2018, Boomer Universal issued 12% bonds dated January 1, 2018, with a...
1) On January 1, 2018, Boomer Universal issued 12% bonds dated January 1, 2018, with a face amount of $200 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record the bond issuance by Boomer on January 1, 2018.
3. Prepare the journal entry to record interest on June 30, 2018, using the straight-line method.
.
2) On February 1, 2018, Wolf Inc. issued 10% bonds dated February 1, 2018, with a face amount of $200,000. The bonds sold for $239,588 and mature in 20 years. The effective interest rate for these bonds was 8%. Interest is paid semiannually on July 31 and January 31. Wolf's fiscal year is the calendar year. Wolf uses the effective interest method of amortization.
Required:
1. Prepare the journal entry to record the bond issuance on February 1, 2018.
2. Prepare the entry to record interest on July 31, 2018.
3. Prepare the necessary journal entry on December 31, 2018.
Homework Answers
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1) On January 1, 2018, Boomer Universal issued 12% bonds dated
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