Question

> Continuing Problem P12-47 Describing bonds, journalizing transactions for bonds payable using the rnalizing transactions for a straight-line amortization method, and jou mortgage payable This problem continues the Canyon Canoe Company situation from Chiap 11. Canyon Canoe Company is considering raising additiona! capital for further ny wants to finance a new business venture into guided trips s to add expansion. The compa down the Amazon River in South America. Additionally, the company want another building on their land to offer more services for local customers. of Canyon Canoe Company plans to raise the capital by issuing $210,000 7.5%, six-year bonds on January 2, 2020, The bonds pay interest semiannually on June 30 and December 31. The company receives $208,476 when the bonds are issued. The company also issues a mortgage payable for $450,000 on January 2, 2020. The proceeds from the mortgage will be used to construct the new building, The mortgage requires annual payments of $45,000 plus interest for ten years, payable on December 31, The mortgage interest rate is 8%. Requirements 1. Will the bonds issue at face value, a premium, or a discount? 2. Record the following transactions. Include dates and round to the nearest dollar. Omit explanations. a. Cash received from the bond issue. b. Cash recived from the mortgage payable c. Semiannual bond interest payments for 2020. Amortize the premium or discount using the straight-line amortization method. d. Payment on the mortgage payable for 2020. 3. Calculate the total interest expense incurred in 2020.

Answer 1

Coupon rate per Period (7.50%/2)			3.75%
Face value of bond			$             210,000
Interest paid (210000*3.75%)			$                  7,875
Interest paid on			Semi annually
Number of Interest payments (6 years *2)			12
Price of Bond			$             208,476
Less: face value of Bond			$             210,000
Discount on Bond payable			$                  1,524
Bond issue at discount.			Discount
Amortization of Discount (1524/12)			$                      127

Journal entries
Answer	Date	General Journal	Debit	Credit
A	Jan 2, 2020	Cash	208,476
		Discount on Bond payable	1,524
		Bond payable		210,000
		(To record issued of bond payable at Discount.)
B	Jan 2, 2020	Cash	450,000
		Mortgage payable		450,000
		(To record Cash received from Mortgage payable.)
C	Jun 30, 2020	Interest expense	8,002
		Discount on Bond payable		127
		Cash		7,875
		(To record interest expense and amortization of bond Discount.)
C	Dec 31, 2020	Interest expense	1,524
		Discount on Bond payable		-
		Cash		1,524
		(To record interest expense and amortization of bond Discount.)
D	Dec 31, 2020	Interest expense (450000*8%)	36,000
		Mortgage payable	45,000
		Cash		81,000
		(To record Installment paid on Mortgage payable.)

Interest on Bond payable (8002+8002)	$                16,004
Interest on Mortgage payable	$                36,000
Total interest Expense incurred in 2020	$                52,004