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Chapter 12: 3RQ (page 654)
What is a mortgage payable?
Long-term liability is a liability that is due in more than one yaer.
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Journalizing bond issuance and interest payments
On January 1, 2018, Roberts Unlimited issues 8%, 20-year bonds payable with aface value of $240,000. The bonds are issued at 104 and pay interest on June 30 andDecember 31.
Requirements
1. Journalize the issuance of the bonds on January 1, 2018.
2. Journalize the semiannual interest payment and amortization of bond premium onJune 30, 2018.
3. Journalize the semiannual interest payment and amortization of bond premium onDecember 31, 2018.
4. Journalize the retirement of the bond at maturity, assuming the last interest paymenthas already been recorded. (Give the date).
On January 1, 2018, Fox Corporation signed an \(80,000, four-year, 4% note. The loan required Fox to make payments annually
on December 31 of \)20,000 principal plus interest.
1. Journalize the issuance of the note on January 1, 2018.
2. Journalize the first payment on December 31, 2018.
Bond prices depend on the market rate of interest, stated rate of interest,and time.
Requirements
1. Compute the price of the following 8% bonds of Country Telecom.
a. \(100,000 issued at 75.25
b. \)100,000 issued at 103.50
c. \(100,000 issued at 94.50
d. \)100,000 issued at 103.25
2. Which bond will Country Telecom have to pay the most to retire at maturity?
Explain your answer.
Schmidt Company issued $100,000, 4%, 10-year bonds payable at 98 on January 1, 2018.
6. Journalize the issuance of the bonds payable on January 1, 2018.
7. Journalize the payment of semiannual interest and amortization of the bond discount or premium (using the straight-line
amortization method) on July 1, 2018.
8. Assume the bonds payable was instead issued at 106. Journalize the issuance of the bonds payable and the payment of the
first semiannual interest and amortization of the bond discount or premium.
Determining the present value of bond at issuance
On December 31, 2018, when the market interest rate is 12%, Benson Realty issues
$600,000 of 9.25%, 10-year bonds payable. The bonds pay interest semi annually.
Determine the present value of the bonds at issuance.
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