Question

Q.1 Three year bonds are issued at face value of SR100,000 on Jan. 1, 2007, a stated interest rate of 8%, and market rate of 8%.

Q.2 STC Company issues at par 10 years' term bonds with a par value of SR 800,000, dated January 1, 2007, and bearing interest at an annual rate of 10% payable semi-annually on January 1 and July1.

Pass necessary entries for one year in the books of STC.

Q.3 Three year bonds are issued at face value of SR 100, 000 on Jan. 1, 2007, at a stated interest rate of 8%. Calculate the issue price of the bonds assuming a market interest rate of 10%. The present value of SR 1 is .75132 at 10% after 3 years and the present value of an ordinary annuity of SR 1 is 2.48685 at 10% after 3 years. Prepare discount amortization table and journal entries for three years.

Q.4 SAPTCO   issues   SR 600, 000 bonds at the rate of 7% on January 1, 2008, at 97% for 3 years. Pass the necessary entries for one year.

Q.5 SAPTCO issues   SR 400, 000 bonds at the rate of 9% on January 1, 2008, at 106% for 3 years. Pass the necessary entries for one year.

Q.6 Three year bonds are issued at face value of SR 100,000 on Jan. 1, 2007, and a stated interest rate of 8%. Calculate the issue price of the bonds assuming a market interest rate of 6%. The present value of SR 1 is .83962 at 6% after 3 years and the present value of an ordinary annuity of SR 1 is 2.67301 at 6% after 3 years.

Q.7. Three year 8% bonds of SR 100,000 issued on Jan. 1, 2007, are recalled at 105 on Dec. 31, 2008. Expenses of recall are SR 2,000. Market interest on issue date was 8%.

Q8. On Jan. 1, 2010, General Bell Corporation issued at 97%, bonds with a par value of SR 800,000 due in 20 years. It incurred bond issue cost totaling SR 16,000. Eight years after the issue date, General Bells calls the entire issue at 101% and cancels it. Compute the loss on redemption (extinguishment).   

Q.9. On Jan. 1, 2011, STC retired SR 500,000 of bonds at 99%. At the time of retirement, the unamortized premium was SR 15,000 and unamortized bond issue costs were SR 5,250. Prepare journal entries of reacquisition of bonds in the books of STC.

Answer 1

Answer 1

Bank A/c Dr 100000

To Bonds A/c 100000

Interest on Bonds A/c Dr 8000

To Bank A/c 8000

Answer 2

Bank A/c Dr 800000

To Bonds A/c 800000

Interest on Bonds A/c Dr 40000

To Bank A/c 40000

(Entry to be recorded for interest payment on both the dates)

Answer 4

Bank A/c Dr 582000

Discount on issue of Bonds A/c Dr 18000

To Bonds A/c 600000

Interest on Bonds A/c Dr 42000

To Bank A/c 42000

Answer 5

Bank A/c Dr 424000

To Bonds A/c 400000

To Premium on issue of Bonds A/c 24000

Interest on Bonds A/c Dr 36000

To Bank A/c 36000

Answer 7

Bonds A/c Dr 100000

Loss on Redemption of Bonds A/c Dr 5000

To Bank A/c 105000

Expenses on Recall of Bonds Ac Dr 2000

To Bank A/c 2000

Interest on Bonds A/c Dr 8000

To Bank A/c 8000

Answer 8

Bank A/c Dr 776000

Discount on issue of Bonds A/c Dr 24000

To Bonds A/c 800000

Bonds Issue Cost A/c Dr 16000

To Bank A/c 16000

Bonds A/c Dr 800000

Loss on Redemption of Bonds A/c Dr 8000

To Bank A/c 808000

Answer 9

Bonds A/c Dr 500000

To Bank A/c 495000

To Profit on Retirement of Bonds A/c 5000

Unamortized Premium A/c Dr 5250

To unamortized Issue Cost A/c 5250