Question

apter 14 On March 1, 2021, Brown-Ferring Corporation issued $101.5 million of 12% bonds, dated January 1, 2021, for $98 million (plus accrued interest). The bonds mature on December 31, 2040, and pay interest semiannually on June 30 and December 31. Brown-Ferring's fiscal period is the calendar year. Required: 1. Determine the amount of accrued interest that was included in the proceeds received from the bond sale. 2. Prepare the journal entry for the issuance of the bonds by Brown-Ferring. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry for the issuance of the bonds by Brown Ferring. (If no entry is required for a transaction/event, select "No Journal entry required in the first account field. Enter your answers in millions and round to 2 decimal places (ie, 5,500,000 should be entered as 5.50)) View transaction list Journal entry worksheet 1 Record the issuance of the bonds

Answer 1

Answer:

1

Calculation of Accrued Interest (from Jan to February)

= Face Value of Bonds x Rate of Interest   x Period

=101,500,000 x 12 % x 2/12

=2,030,000

Accrued Interest=2,030,000

2

Journal Entry of Bond Issuance:

Transaction	Particulars	Debit($)	Credit($)
1)	Cash ($98000000+$2030000)	100030000
	Discount on bonds	3500000
	Bonds Payable		101500000
	Interest Payable (Accrued)		2030000
	(Being Record Issuance of Bond)

Working notes for the above answer is as under

Discount on bonds payable

=101500000 + 2030000-100030000

=3500000

Discount on bonds=3500000