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Chapter 12: Q11RQ (page 654)
In regard to a bond discount or premium, what is the straight-line amortization
method?
Allocating equal discount or premium over the interest period is the straight-line amortization method.
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Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:
3. A 10% bonds payable is issued when the market interest rate is 8%.
4. A 10% bonds payable is issued when the market interest rate is 10%.
5. A 10% bonds payable is issued when the market interest rate is 12%.
What is an annuity?
Payne Corporation has the folowing accounts as of December 31, 2018:
Total Assets $60,000
Total Liabilities 20,000
Total Equity 40,000
Compute the debt to equity ratio at December 31,2018.
Retiring bonds payable before maturity
CoastalView Magazineissued $600,000 of 15-year, 5% callable bonds payable on July31, 2018, at 94. On July 31, 2021, CoastalViewcalled the bonds at 101. Assume annualinterest payments.
Requirements
1. Without making journal entries, compute the carrying amount of the bonds payableat July 31, 2021.
2. Assume all amortization has been recorded properly. Journalize the retirement ofthe bonds on July 31, 2021. No explanation is required.
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).
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