Question

EA6. LO 13.2 Oak Branch Inc. issued $700,000 of 5%, 10-year bonds when the market rate was 4%. They received $757,243. Interest was paid semi-annually. Prepare an amortization table for the first three years of the bonds. EAZ. LO 13.3 On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $1,000 for $104,000. The bonds had a stated rate of 6% and paid interest semiannually. What is the journal entry to record the issuance of the bonds? EAS. LO 13.3 Medhurst Corporation issued $90,000 in bonds for $87,000. The bonds had a stated rate of 8% and pay interest quarterly. What is the journal entry to record the sale of the bonds?

Answer 1

Solution EA 6:

Bond Amortization Table
Semiannual interest period	Interest to be paid	Interest expense	Premium Amortization	Unamortized Premium	Bond Carrying Value
Issue date				$57,243	$757,243
1	$17,500	$15,145	$2,355	$54,888	$754,888
2	$17,500	$15,098	$2,402	$52,486	$752,486
3	$17,500	$15,050	$2,450	$50,035	$750,035
4	$17,500	$15,001	$2,499	$47,536	$747,536
5	$17,500	$14,951	$2,549	$44,987	$744,987
6	$17,500	$14,900	$2,600	$42,386	$742,386

Solution EA7:

Journal Entries - Foxcroft Inc.
Date	Particulars	Debit	Credit
Jan 1, Year 1	Cash Dr	$104,000.00
	To Bond Payable		$100,000.00
	To Premium on Bond Payable		$4,000.00
	(To record issue of bond at premium)

Solution EA8:

Journal Entries
Date	Particulars	Debit	Credit
Jan 1, Year 1	Cash Dr	$87,000.00
	Discount on bond payable Dr	$3,000.00
	To Bond Payable		$90,000.00
	(To record issue of bond at discount)