Homework Answers
14.
Par value of bonds = $100,000
Issue price of bonds = 100,000 x 97%
= $97,000
Discount on bonds payable = 100,000 - 97,000
= $3,000
Journal
|
No |
Account Title and Explanation |
Debit |
Credit |
| c | Cash | 97,000 | |
| Discount on bond payable | 3,000 | ||
| Bond payable | 100,000 |
Correct option is (c)
15.
Par value of bonds = $100,000
Issue price of bonds = 100,000 x 97%
= $97,000
Discount on bonds payable = 100,000 - 97,000
= $3,000
Annual amortization of bond discount = 3,000/5
= $600
Carrying value of bonds on Dec 31, 2012 = 97,000 + 600
= $97,600
Correct option is (c)
16.
Par value of bonds = $100,000
Issue price of bonds = 100,000 x 103%
= $103,000
Premium on bonds payable = Issue price of bonds - Par value of bonds
= 103,000 - 100,000
= $3,000
Annual amortization of bond premium = 3,000/10
= $300
Annual interest payment = 100,000 x 6%
= $6000
Journal
|
No |
Account Title and Explanation |
Debit |
Credit |
| D | Interest expense | 5,700 | |
| Premium on bond payable | 300 | ||
| Cash | 6,000 |
Correct option is (D)
17.
Interest expense for 2011 = 92,977 x 7%
= $6,508.39
Annual interest payment = 100,000 x 6%
= $6,000
Discount amortization for 2011 = Interest expense for 2011 - Annual interest payment
= 6,508.39 - 6,000
= $508.39
Correct option is (B)
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