Question

Awarna Marsh Company has 10%. 1 year bonds payable at m e on une 30, 2008. The bonde donne 30, 2018 and A na Marsh a laches and December 31 Requiremen1. Will the bonds b ed faceva la premium, Mascount them to the face the materiale 117 the materestre 11 e bonds will b e Requirement . Alam Marched $200.000 of the bonds 00 Round l otions to the r ole Recordance of the bondson June 10, 2018 Recordis fest, then credere explanations on the last of the jumal entry Round your answers to the nearest whole dolar Recorde payment where and amortization of the discount on December 31, 2018. Use the w ine on method Records t he credite Select options on the line of the Round your ans Choose from any lot or enter wy bor in the input files and then continue to

Answer 1

1. When the market rate is 8% the 10% bond can be sold at a premium. However, when the market rate rises to 11%, the bonds price will fall in market and they can be issued at a discount to attract more investors.

2. a.

June 30, 2018	Cash	$180000
	Discount on issue of bond (asset)	$20000
	10% Bonds		$200000

b.

Dec 31, 2018	Interest on bond (expense)	$10000
	Cash		$10000
Dec 31, 2018	Discount on issue of bond(expense)	$1000
	Discount on issue of bond(asset)		$1000

c. The bonds carrying amount will be $200000 on Dec 31, 2018 and will continue to do so until maturity.

d.

June 30, 2019	Interest on bond(expense)	$10000
	Cash		$10000
June 30, 2019	Discount on issue of bond(expense)	$1000
	Discount on issue of bond(asset)		$1000