Question

1. On January 1, 2020, Luna’s Feather Pillows, Inc borrowed $100,000 at 6%. The loan is due December 31, 2020. Record, in good form, all the journal entries related to this borrowing.

2. On January 1, 2020, Luna borrowed $250,000 at 8% by issuing a note. The note matures on December 31, 2021. Record, in good form, all the journal entries related to this borrowing.

The fiscal year is a calendar year.

3. On January 1, 2021, Luna’s Feather Pillows, Inc. issued 8% bonds dated January 1, with a face amount of $800,000. The bonds mature on December 31, 2024 (4 years) and pay interest annually. The market yield for bonds of similar risk and maturity was 8% when the bonds were issued. Prepare, in good form, all the journal entries and amortization schedule for the bonds.

4. On January 1, 2021, Luna’s Feather Pillows, Inc. issued 8% bonds dated January 1, with a face amount of $800,000. The bonds mature on December 31, 2025 (5 years) and pay interest annually. The market yield for bonds of similar risk and maturity was 12% when the bonds were issued. Prepare, in good form, all the journal entries and amortization schedule for the bonds.

5. On January 1, 2021, Luna’s Feather Pillows, Inc. issued 8% bonds dated January 1, with a face amount of $800,000. The bonds mature on December 31, 2025 (5 years) and pay interest semi-annually. The market yield for bonds of similar risk and maturity was 6% when the bonds were issued. Prepare, in good form, all the journal entries and amortization schedule for the bonds.

Answer 1

E C Debit (S) 1,00,000 D Credit(S) 1,00,000 co vawn 1,00,000 6,000 1,06,000 2,50,000/ 2,50,000 20,000 20,000 А B 1 Date Account Titles 01-Jan-20 Cash Notes Payable 31-Dec-20 Notes Payable Interest Expense Cash 01-Jan-20 Cash Notes Payable 9 31-Dec-20 Interest Expense 10 Interest Payable 11 31-Dec-20 Notes Payable 12 Interest Payable 13 Interest Expense 14 Cash 15 01-Jan-20 Cash 16 Bonds Payable 17 31-Dec-21 Interest Expense Cash 19 31-Dec-22 Interest Expense 20 Cash 21 31-Dec-23 Interest Expense 22 Cash 23 31-Dec-24 Interest Expense 24 Cash 31-Dec-25 Bonds Payable 26 Cash 2,50,000 20,000 20,000 2,90,000 8,00,000 8,00,000 T. 64,000 18 64,000 64,000 64,000 64,000 64,000 64,000 64,000 25 8,00,000 8,00,000 27

B A 1 Date 2 43831 D Credit(S) Debit (S) 100000 3 100000 100000 =C4*6% 4 44196 5 6 7 =A2 =C4+C5 250000 250000 =250000*8% =C9 250000 =D10 =C9 Account Titles Cash Notes Payable Notes Payable Interest Expense Cash Cash Notes Payable Interest Expense Interest Payable Notes Payable Interest Payable Interest Expense Cash Cash Bonds Payable Interest Expense Cash Interest Expense Cash Interest Expense Cash Interest Expense Cash Bonds Payable Cash =C11+C12+C13 800000 800000 9 =A4 10 11 =A9 12 13 14 15 =A2 16 17 44561 18 19 44926 20 21 45291 22 23 45657 24 25 46022 26 27 =C15*8% =C17 =$C$15*8% 164000 =$C$15*8% 64000 =$C$15*8% 164000 800000 800000

28 Bond Amortization Schedule : 29 Amount Paid 30 Year 31 Jan 1, 2021 32 Dec 31, 2021 33 Dec 31, 2022 34 Dec 31, 2023 35 Dec 31, 2024 36 37 64,000 64,000 64,000 64,000 Interest | Carrying Expense Value of Bonds 8,00,000 64000 8,00,000 64,000 8,00,000 64,000 8,00,000 64,000 0