Question

1. On January 1, Year 1, Price Co. issued $393,000 of five-year, 6 percent bonds at 95. Interest is payable annually on December 31. The discount is amortized using the straight-line method.
  
Required
Prepare the journal entries to record the bond transactions for Year 1 and Year 2.

- Record the entry for issuance of bonds

-Record the entry for recognizing interest expense on Dec. 31, Year 1

-Record the entry for recognizing interest expense on Dec. 31, Year 2.

2. Nivan Co. issued $368,000 of 8 percent, 10-year, callable bonds on January 1, Year 1, at their face value. The call premium was 4 percent (bonds are callable at 104). Interest was payable annually on December 31. The bonds were called on December 31, Year 5.

Required
Prepare the journal entries to record the bond issue on January 1, Year 1, and the bond redemption on December 31, Year 5. Entries for accrual and payment of interest are not required.

-Record the bond issue on January 1, Year 1.

-Record the bond redemption on December 31, Year 5.

3. Which of the following statements regarding the stated rate of interest is true if a bond is sold at 101?

Ο The stated rate equals the market rate. Ο The state rate is unrelated to the market rate. Ο The stated rate is higher than the market rate. Ο The stated rate is lower than the market rate.

.Which of the following describes what happens when bonds are issued when the market interest rate is less than the stated interest rate?

It raises the effective interest rate above the stated rate of interest. The bonds are issued at a premium. The bonds are issued at less than their face value. ( The bonds are issued at a premium and the effective interest rate is higher than the stated rate.

5.On January 1, Year 1, Sayers Company issued $356,000 of five-year, 6 percent bonds at 102. Interest is payable semiannually on June 30 and December 31. The premium is amortized using the straight-line method.

Required
Prepare the journal entries to record the bond transactions for Year 1 and Year 2

-Record the issue of bonds payable with premium. (Jan 01)

-Record the interest expenses and amortization for bonds payable.(Jun 30)

-Record the interest expenses and amortization for bonds payable.(Dec 31)

-Record the interest expenses and amortization for bonds payable.(Jun 30)

-Record the interest expenses and amortization for bonds payable. (Dec 31)

Answer 1

1.

Journal

January 1, year 1	Cash	373,350
	Discount on bonds payable	19,650
	Bonds payable		393,000
Dec. 31, year 1	Interest expense	27,510
	Discount on bonds payable		3,930
	Cash		23,580
Dec. 31, year 2	Interest expense	27,510
	Discount on bonds payable		3,930
	Cash		23,580

Par value of bonds = $393,000

Cash proceeds from issue of bonds = $393,000 x 95%

= $373,350

Discount on bonds payable = Par value of bonds - Cash proceeds from issue of bonds

= 393,000 - 373,350

= $19,650

Annual amortization of Discount on bonds payable = 19,650/5

= $3,930

Annual interest payment = 393,000 x 6%

= $23,580

Only first question could be answered as per HOMEWORKLIB POLICY. You please post your other questions separately. Thank you