Chapter 10 Liabilities 485- Record the entries for the following:
a. The first semiannual interest payment on December 31, 2006, and the amortization of
the bond premium, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2007, and the amortization of the bond premium, us-
ing the straight-line method. - Determine the total interest expense for 2006.
- Will the bond proceeds always be greater than the face amount of the bonds when the con-
tract rate is greater than the market rate of interest? Explain.
On July 1, 2006, Cougar Corporation, a wholesaler of used robotic equipment, issued $7,500,000
of 10-year, 10% bonds when the market rate of interest was 13%. Interest on the bonds is
payable semiannually on December 31 and June 30. The fiscal year of the company is the cal-
endar year.Instructions
- Calculate the selling price and the amount or discount of premium of the bond issue. Use
the present value tables in Appendix A. - Record the entry for the amount of the cash proceeds from the sale of the bonds.
- Record the entries for the following:
a. The first semiannual interest payment on December 31, 2006, and the amortization
of the bond discount, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2007, and the amortization of the bond discount, using
the straight-line method. - Determine the total interest expense for 2006.
- Will the bond proceeds always be less than the face amount of the bonds when the contract
rate is less than the market rate of interest? Explain.
The following transactions were completed by Douthett Inc., whose fiscal year is the calendar
year:2006
July 1 Issued $25,000,000 of five-year, 8% callable bonds dated July 1, 2006, at an effective rate
of 10%. Interest is payable semiannually on December 31 and June 30.
Dec. 31 Paid the semiannual interest on the bonds.
31 Recorded bond discount amortization, which was determined by using the straight-line
method.2007
June 30 Paid the semiannual interest on the bonds. (Amortization of discount or premium is to
be recorded annually.)
Dec. 31 Paid the semiannual interest on the bonds.
31 Recorded bond discount amortization, which was determined by using the straight-line
method.2008
June 30 Recorded the redemption of the bonds, which were called at 98^1 – 2.
The balance in the bond discount account is $1,158,306 after payment of interest
and amortization of discount have been recorded. (Record the redemption
only.)Instructions
- Calculate the selling price and the amount of the discount or premium for the bond
issue.Use the present value tables in Appendix A. - Record the entries for the foregoing transactions.
- Indicate the amount of the interest expense in (a) 2006 and (b) 2007.
- Determine the carrying amount of the bonds as of December 31, 2007.
Alternate Problem
10-4B
Bond discount; entries for
bonds payable transactions
Goal 2
- $436,977.94
Alternate Problem
10-5B
Entries for bonds payable
transactions
Goal 2
- a. $1,193,051
GENERAL LEDGER