Honor de Balzac Inc. has been producing quality childrens apparel for more than 25 years. The companys

Honoré de Balzac Inc. has been producing quality children’s apparel for more than 25 years. The company’s fiscal year runs from April 1 to March 31. The following information relates to the obligations of Balzac as of March 31, 2006.

Bonds Payable Balzac issued $5,000,000 of 11% bonds on April 1, 2005. Market interest rates on that date for bonds of similar risk were 10%. Bonds mature on April 1, 2015; interest is paid annually on April 1.

Notes Payable Balzac has signed several long-term notes with financial institutions and insurance companies.

The maturities of these notes are given in the schedule below. The total unpaid interest for all of these notes amounts to $210,000 on March 31, 2006.

Asset Retirement Obligation Balzac purchased a warehouse in 2001 for $300,000. In February 2006, due to the passage of a new wetlands restoration law, Balzac will be required to restore the wetlands surrounding the warehouse site when the warehouse is abandoned in 2010. Balzac has estimated that the present value of the cost to restore the site is $35,000.

Prepare the journal entry for the issuance of the bonds and on the first interest payment date.

Use a computer spreadsheet to prepare an amortization schedule for the bonds.

Prepare the long-term liabilities section of the balance sheet and appropriate notes to the financial statements for Balzac Inc. as of March 31, 2006.

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Due Date April 1, 2006 July 1, 2006 October 1, 2006 January 1, 2007 April 1, 2007-March 31, 2008 April 1, 2008-March 31, 2009 Amount Due $ 200,000 300,000 150,000 150,000 600,000 500,000 $1,900,000