Selected transactions on the books of Pfaff Corporation follow: May 1, 2017 Bonds payable with a par

Question:

Selected transactions on the books of Pfaff Corporation follow:

May 1, 2017 Bonds payable with a par value of $700,000, which are dated January 1, 2017, are sold at 105 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature on January 1, 2027. (Use an interest expense account for accrued interest.)

Dec. 31 Adjusting entries are made to record the accrued interest on the bonds and the amortization of the proper amount of premium. (Use straight-line amortization.)

Jan 1, 2018 Interest on the bonds is paid.

April 1. Par value bonds of $420,000 are repurchased at 103 plus accrued interest and are retired. (Bond premium is to be amortized only at the end of each year.)

Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.

Instructions

(a) Assume that Pfaff follows ASPE. Prepare the journal entries for the transactions above.

(b) How would your answers to the above change if Pfaff were to follow IFRS?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...