1. Farmland County borrowed $100,000 on a 10-year, 7% installment note payable on January 1, Year...
1. Farmland County borrowed $100,000 on a 10-year, 7% installment note payable on January 1, Year 1. The terms of the note require Farmland to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31, Year 1 is:
2.Warren Long Park Corp have bonds outstanding with a par value of $100,000 and a carrying value of $97,300. If the company calls these bonds at a price of $95,000, what is the gain or loss on retirement?
Homework Answers
1.
Borrowing amount = $100,000
Interest expense for year 1 = 100,000 x 7%
= $7,000
Annual payment = $14,238
Hence, payment towards principal = Annual payment - Interest payment
= 14,238-7,000
= $7,238
| Journal | |||
| Date | General Journal | Debit | Credit |
| Year 1, Dec. 31 | Interest expense | $7,000 | |
| Note payable | $7,238 | ||
| Cash | $14,238 | ||
2.
Carrying value of bonds = $97,300
Redemption price of bonds = $95,000
Gain on retirement of bonds = Carrying value of bonds - Redemption price of bonds
= 97,300-95,000
= $2,300
Kindly comment if you need further assistance. Thanks‼!
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