Question

Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

Bond Premium, Entries for Bonds Payable Transactions

Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $70,200,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $78,948,507. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

For all journal entries, if an amount box does not require an entry, leave it blank.

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.

2. Journalize the entries to record the following:

a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.

b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.

3. Determine the total interest expense for 20Y1. Round to the nearest dollar.
$

4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?

5. Compute the price of $78,948,507 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount $
Present value of the semi-annual interest payments
Price received for the bonds $
0 0
Add a comment Improve this question Transcribed image text
Answer #1

Solution 1:

Journal Entries - Rodgers Corporation
Date Particulars Debit Credit
1-Jul-20Y1 Cash Dr $78,948,507.00
       To Bond Payable $70,200,000.00
       To Premium on Bond Payable $8,748,507.00
(To record issue of bonds)

Solution 2:

Journal Entries - Rodgers Corporation
Event Particulars Debit Credit
31-Dec-20Y1 Interest expense Dr $3,774,575.00
Preimum on bond payable Dr ($8,748,507 / 20) $437,425.00
       To Cash ($70,200,000*12%*6/12) $4,212,000.00
(To record semiannual interest payment and Premium amortization)
30-Jun-20Y2 Interest expense Dr $3,774,575.00
Preimum on bond payable Dr ($8,748,507 / 20) $437,425.00
       To Cash ($70,200,000*12%*6/12) $4,212,000.00
(To record semiannual interest payment and Premium amortization)

Solution 3:

Total interest expense for 20Y1 = $3,774,575

Solution 4:

Yes, bonds proceed always greater than face amount when contract rate is greater than market rate of interest.

Solution 5:

Computation of bond price
Table values are based on:
n= 20
i= 5.00%
Cash flow Table Value Amount Present Value
Present value of face amount 0.37689 $70,200,000.00 $26,457,678
Present value of semiannual interest 12.46221 $4,212,000.00 $52,490,829
Price received for the bonds $78,948,507
Add a comment
Know the answer?
Add Answer to:
Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $48,500,000 of 10-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $51,522,110. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the...

  • ............... Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On...

    ............... Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $32,200,000 of 10-year, 13% bonds at a market (effective) interest rate of 12%, receiving cash of $34,046,503. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $67,500,000 of 10-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $71,706,030. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 2041, Rodgers issued $70,600,000 of 10-year, 14% bonds at a market (effective) interest rate of 125, receiving cash of 578,697,425. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank, 1. Journalize the...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers issued $65,0000,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $73,100,469. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry, leave...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $33,600,000 of 10-year, 13% bonds at a market (effective) interest rate of 12%, receiving cash of $35,526,785. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry,...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $89,000,000 of 10-year, 14% bonds at a market (effective) interest rate of 13%, receiving cash of $93,903,517. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry,...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $89,000,000 of 10-year, 14% bonds at a market (effective) interest rate of 13%, receiving cash of $93,903,517. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry,...

  • Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...

    Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $65,000,000 of 10 year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $73,100,469. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an...

  • Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $70,200,000...

    Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $70,200,000 of 10-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $74,574,271. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry, leave it blank. 1. Journalize the entry...

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