(Comprehensive Bond Problem) In each of the following independent cases the company closes its books on December...
Question:
(Comprehensive Bond Problem) In each of the following independent cases the company closes its books on December 31.
1. Danny Ferry Co. sells $250,000 of 10% bonds on March 1, 2007. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2010. The bonds yield 12%. Give entries through December 31, 2008.
2. Brad Dougherty Co. sells $600,000 of 12% bonds on June 1, 2007. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2011. The bonds yield 10%. On October 1, 2008, Dougherty buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2009.
Instructions (Round to the nearest dollar.)
For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated.
Use the effective interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)
Step by Step Answer:
Intermediate Accounting
ISBN: 9780471448969
11th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield