Question

Please help me solve all the Requirements 1, 2, and 3.

(please use clear details and explanations)

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P12-47 Describing bonds, journalizing transactions for bonds payable using the straight-line amortization method, and journalizing transactions for a mortgage payable This problem continues the Canyon Canoe Company situation from Chapter 11. Canyon Canoe Company is considering raising additional capital for further expansion. The company wants to finance a new business venture into guided trips down the Amazon River in South America. Additionally, the company wants to add another building on their land to offer more services for local customers. Canyon Canoe Company plans to raise the capital by issuing $210,000 of 7.5%, six-year bonds on January 2, 2020. The bonds pay interest semiannually on June 30 and December 31. The company receives $208,476 when the bonds are issued. also issues a mortgage payable for $450,000 on January 2, 2020. The company The proceeds from the mortgage will be used to construct the new building. The mortgage requires annual payments of $45,000 plus interest for ten years, payable on December 31. The mortgage interest rate is 8%. Requirements 1. Will the bonds issue at face value, a premium, or a discount? 2. Record the following transactions. Include dates and round to the nearest dollar. Omit explanations. a. Cash received from the bond issue. b. Cash received from the mortgage payable

Answer 1

1	Face value of the bond=$ 210000
	Proceeds from bond issue=$ 208476
	Bond is issued at discount since the proceeds from bond issue < Face value of the bond
2	Ref.	Account titles and explanation					Debit	Credit
	a.	Cash					208476
		Discount on issue of bonds			(210000-208476)		1524
		Bond payable						210000
		(Cash received from bond issue)
	b.	Cash					450000
		Mortgage payable						450000
		(Cash received from mortgage)
	c.	Interest expense			(7875-127)		7748
		Discount on issue of bonds			(Note:1)		127
		Cash			(210000*7.5%*6/12)			7875
		(Semiannual bond interest payments)
	d.	Interest expense			(450000*8%)		36000
		Mortgage payable					45000
		Cash						81000
		(Payment on the mortgage)
	Note:1
	Discount to be amortized=Total discount/Number of semi-annual payments
	Number of semi-annual payments=Life of the bond*2=6*2=12
	Discount to be amortized=1524/12=$ 127
3	Total interest expense incurred in 2020:
					$
	Bond:
	June 30.				7748
	Dec 31.	(Same entry as on June 30.)			7748
	Mortgage:
	Interest				36000
	Total				51496
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