ZuoTi.Pro
Question

Rockwood Company issued $400,000 of 11% bonds on November 1, 2019, at 102. Interest on the bonds is payable on November 1 and

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer:

1.)

Date Particulars Debit ($)` `Credit ($)
Nov 1, 2019 Cash (400000 x 102%) 408,000
Premium on Bonds payable 8,000
Bonds payable 400,000

2.)
Premium amortization per period = Total premium/No of interest periods
=$8000/20
=$400

Date particulars Debit ($) Credit ($)
May 1, 2020 Interest 21,600
Premium on bonds payable 400
Cash (400000 x 11% x 1/2) 22,000
Nov 1, 2020 Interest expense 21,600
Premium on bonds payable 400
Cash (400000 x 11% x 1/2) 22,000

3.)

Date Particulars Debit ($) Credit ($)
Feb 1, 2021 Interest expense 2,160
Premium on bonds payable (400 x (80000/400000)x3/6) 40
Interest payable (80000 x 11% x 3/12) 2,200
Total premium (8000 x (80000/400000)) 1,600
Premium to be amortized per interest period 1600/20 80
Amount Amortized since november 1, 2019 till November 1, 2020 (80 x 2) 160

Amount amortized since november 1, 2020 till febraury 1, 2021 = $40
Unamortized premium = (1600-160-40) = $1400
Gain (loss) from redemption = carrying value - call price excluding interest
Carrying value = face value + Unamortized premium
=$80000+1400
=81400
Call price excluding interest =80000 x 98% =78400
Gain (loss) from redemption = 81400-78400 =3000

Date Particulars Debit ($) Credit ($)
feb 1, 2021 Bonds payable 80,000
Interest payable 2200
Premium on bonds payable 1400
Gain on redemption 3000
Cash (78400+2200) 80600
0 0
Add a comment
Know the answer?
Add Answer to:
Rockwood Company issued $400,000 of 11% bonds on November 1, 2019, at 102. Interest on the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 2. On February 1, 2019, Mojito, Inc, issued $1,000,000,6% bonds for $1,082,000. Interest is payable semiannually...

    2. On February 1, 2019, Mojito, Inc, issued $1,000,000,6% bonds for $1,082,000. Interest is payable semiannually on January 31 and July 31 with the bonds maturing on February 1, 2029 (10-year bonds). The bonds are callable at 102 On February 1, 2020, Mojito retired $600,000 of the bonds at the call price. Required: a. Prepare the journal entry for the issuance of the bonds b. Prepare any required journal entries for interest payments on July 31, 2019 and January 31,...

  • Stilton Hotels Ltd. issued 10-year bonds on November 1, 2020, to finance the purchase of several...

    Stilton Hotels Ltd. issued 10-year bonds on November 1, 2020, to finance the purchase of several new hotels. The bonds pay interest semi-annually on April 30 and October 31 every year. Stilton Hotels decided to retire some of the bonds on June 1, 2022. Stilton Hotels follows IFRS Other information pertaining to the issuance of the bonds follows: Face value of bonds $ 1,152,000 Coupon rate Effective interest rate 10% Percentage of bond issue that was retired 19% Price at...

  • 22. Mozart Inc. issued 5% bonds with a face amount of $500,000 on November 1, 2018....

    22. Mozart Inc. issued 5% bonds with a face amount of $500,000 on November 1, 2018. The bonds sold for a price to yield the market rate of 6%. The bonds mature October 31, 2038 (20 years). Interest is paid semiannually on April 30 and October 31. The fiscal year ends December 31 for Mozart. Show your calculations. Required: 1) Determine the price of the bonds issued on November 1, 2018, Show your computations. 2) Prepare the journal entry to...

  • 3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest...

    3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest is payable annually on January 1. The company uses the straight-line method to amortization any bond discount or premium REQUIRED (16 points) Prepare journal entries to record the following (round to nearest dollar.) Jan 1, 2021 Issuance of the bonds on January 1, 2021 Dec 31, 2021 Recorded accrued interest Jan 1, 2022 Payment of interest Jan 1, 2022 After payment of interest on...

  • 3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest...

    3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest is payable annually on January 1. The company uses the straight-line method to amortization any bond discount or premium REQUIRED (16 points) Prepare journal entries to record the following (round to nearest dollar.) Jan 1, 2021 Issuance of the bonds on January 1, 2021 Dec 31, 2021 Recorded accrued interest Jan 1, 2022 Payment of interest Jan 1, 2022 After payment of interest on...

  • 3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest...

    3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest is payable annually on January 1. The company uses the straight-line method to amortization any bond discount or premium. REQUIRED (16 points) Prepare journal entries to record the following (round to nearest dollar.) Jan 1, 2021 Issuance of the bonds on January 1, 2021 Dec 31, 2021 Recorded accrued interest Jan 1, 2022 Payment of interest Jan 1, 2022 After payment of interest on...

  • 3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest...

    3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest is payable annually on January 1. The company uses the straight-line method to amortization any bond discount or premium REQUIRED (16 points) Prepare journal entries to record the following (round to nearest dollar.) Jan 1, 2021 Issuance of the bonds on January 1, 2021 Dec 31, 2021 Recorded accrued interest Jan 1, 2022 Payment of interest Jan 1, 2022 After payment of interest on...

  • 3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest...

    3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9% bonds, for $1,225,000. Interest is payable annually on January 1. The company uses the straight-line method to amortization any bond discount or premium REQUIRED (16 points) Prepare journal entries to record the following (round to nearest dollar.) Jan 1, 2021 Issuance of the bonds on January 1, 2021 Dec 31, 2021 Recorded accrued interest Jan 1, 2022 Payment of interest Jan 1, 2022 After payment of interest on...

  • On January 1, 2015, Lenore, Inc. issued $800,000, 6% bonds when the market rate was 7%....

    On January 1, 2015, Lenore, Inc. issued $800,000, 6% bonds when the market rate was 7%. Interest is payable semiannually on December 31 and June 30 with bonds maturing on December 31, 2024. The bonds are callable at 103. On December 31, 2018, Lenore retired $400,000 of the bonds at the call price. At the time they retired the bonds, they also paid the accused interest for those bonds retired. Required: a. Prepare the journal entry to record the issuance...

  • Champion Oil issued 10-year bonds dated January 1, 2020. The bonds were issued on March 1,...

    Champion Oil issued 10-year bonds dated January 1, 2020. The bonds were issued on March 1, 2020, with accrued interest. Interest was payable on the bonds on January 1 and July 1 of each year. The company's year-end was December 31. Champion followed ASPE and chose to use the straight-line amortization method. On May 31, 2023, Champion retired a portion of the bond issue, paying any accrued interest at that date. Addtional information pertaining to the bond issue follows: Face...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT