Question

Wyoming Air Company has 10 year bonds payable that mature on June 30, 2028 The bonds are issued on June 30, 2018 and Wyoming Air pays Interest each June 30 and December 31 Read the times Requirement 1. W e bonds be d attace value at a premium or a discount the market interest rate on the date of issuance is the mainterest rate is 8%? the market interest rate is If the market interest rates the bonds will be issued at the bonds will be sodat Requirement. Wyoming A s ed $1000,000 of the bonds 2 Round all calculations to the nearest dollar a. Record ance of the bondsonne 30, 2018 Record debit first, then credits Select explanations on the last line of the unalety Round your answers to Accounts and Explanation Requirements -X (a) Jun 30 1. Waithe bonds be issued a face a t a premium or at a discount the market interest rate ohne daten 15 e tinere alebo 2 Wyoming Aired $1,000,000 of the bonds at 92. Round all callations to the nearest dollar Record issuance of the bonds on June 30, 2015 b. Record the payment offers and antion of the discount on December 31, 2018 Use the straight line amonication method Compute the bonds' carrying amount at December 31, 2018 d. Record the payment of interest and mortation of discount on June 30, 2019

Answer 1

Requirement -1
	If the market interest rate is 5%, the bonds will be issued at Premium.
	If the market interest rate is 8%, the bonds will be issued at Discount.
Requirement-2
	Date	Account titles and explanation	Debit	Credit
	2018
	(a) June 30	Cash	$920,000
		Discount on issue of bond	$80,000
		Bond payable		$1,000,000
		(Bond issued at discount)
	(b) Dec. 31	Interest expense	$34,000
		Cash		$30,000	(1,000,000*6%*3/12)
		Discount on issue of bonds		$4,000	(80,000/20)
		(Interest expense booked)
		Carrying amount of bond as on December 31, 2018
		Bond payable	$1,000,000
		Less: unamortised discount on bonds	$76,000
		Carrying amount	$924,000
	2019
	(d) June, 30	Interest expense	$34,000
		Cash		$30,000
		Discount on issue of bonds		$4,000
		(Interest expense booked)