| Module II: Chapter 14 | |||||||||||||
| 1. On October 1 of the current year a corporation sold, at par plus accrued interest, $1,000,000 of its 12% bonds, | |||||||||||||
| which were dated July 1 of this year. What amount of bond interest expense should the company report on its current year income statement? | |||||||||||||
| 2. A company issued 9%, 10years bonds with a par value of $1,000,000 on September 1, Year 1 when the market rate was 9%. The bonds were dated June 30, Year 1. | ||||||||||||||
| The bond issue price included accrued interest. Interest is paid semiannually on December 31 and June 30. | ||||||||||||||
| (a) Prepare the issuer’s journal entry to record the issuance of the bonds on September 1. | ||||||||||||||
| (b) Prepare the issuer’s journal entry to record the semiannual interest payment on December 31, Year 1. | ||||||||||||||
| 3. A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. | ||||||||||
| The market interest rate of the issue date was 10%, and the issuer received $95,016 for the bonds. | ||||||||||
| On the first semiannual interest date, what amount of cash should be paid to the holds of these bonds for interest? | ||||||||||
| 4. On January 1, a company issued 10-year, 10% bonds payable with a par value of $500,000, and received $442,647 in cash proceeds. | |||||||||||||
| The market rate of interest at the date of issuance was 12%. The bonds pay interest semiannually on July 1 and January 1. | |||||||||||||
| The issuer uses the straight-line method for amortization. Prepare the issuer’s journal entry to record the first semiannual interest payment on July 1. | |||||||||||||
| 5. Wiffery company had the following trading securities in its porfolio of December 31. The fair value adjustment-Trading account | |||||||||||
| had a balance of zero prior to year end adjustment. Prepare the appropriate adjusting journal entry. | |||||||||||
| 6. Kramer Corporation had the following long investment transactions. | |||||||||
| Jan 2; | purchased 5,000 shares of Optic, Inc for $42 per share plus $7,000 in fess and comminssion. | ||||||||
| These shares represent 35% of ownership of Optic. | |||||||||
| Oct 15: | Received Optic, Inc. cash dividend of $2 per share. | ||||||||
| Dec 31: | Optic reported a net loss of $66,000 for the year. | ||||||||
| Prepare the journal entries for Karmer Corporation should record for these transactions and events. | |||||||||