An important application of Financial Accounting is the measurement, recording and balance sheet presentation of long-te
Posted: Sat Feb 19, 2022 2:34 pm
An important application of Financial Accounting is the
measurement, recording and balance sheet presentation of long-term
liabilities. Since typical long-term liabilities involve bonds
payable, the following problem will deal with bonds payable in the
assigned homework and discuss at class.
Problem: (Total = 13 points)
Bond contract rate = 7% semi-annual
Bond par = $10,000
Bond market rate = 6% semi-annual
Bond life = 10 years
1) Find the selling price of this bond (2 pts)
2) Will it be sold at a discount or premium? (1 pt)
3) Do the journal entry for the issuance (2 pts)
4) Calculate the discount/premium amortization per period ( use the
straight-line method) (1 pt)
5) Do the entry for the payment of cash interest per period (2
pts)
6) Do the entry for the amortization of the discount/premium per
period (2pts)
7) Find total interest expense per period (1 pt)
8) Show the balance sheet presentation of the bond after two
periods have elapsed (2 pts)
measurement, recording and balance sheet presentation of long-term
liabilities. Since typical long-term liabilities involve bonds
payable, the following problem will deal with bonds payable in the
assigned homework and discuss at class.
Problem: (Total = 13 points)
Bond contract rate = 7% semi-annual
Bond par = $10,000
Bond market rate = 6% semi-annual
Bond life = 10 years
1) Find the selling price of this bond (2 pts)
2) Will it be sold at a discount or premium? (1 pt)
3) Do the journal entry for the issuance (2 pts)
4) Calculate the discount/premium amortization per period ( use the
straight-line method) (1 pt)
5) Do the entry for the payment of cash interest per period (2
pts)
6) Do the entry for the amortization of the discount/premium per
period (2pts)
7) Find total interest expense per period (1 pt)
8) Show the balance sheet presentation of the bond after two
periods have elapsed (2 pts)