A Entries for Issuing and Calling Bonds Gain Emil Corp produces and sells wind energy driven engines To finance its operations, Emil Corp issued $1,823,000 of 15 year, 14 callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1 The fiscal year of the company is the calendar year Accounts payable bonds payable cash gain on redemption of bonds interest expense loss of redemption interest expense interest payable Journalize the entries to record the following selected transactions 20Y1 May 1 Issued the bonds for cash at their face amount Nov 1 Paid the interest on the bonds 20Y5 Nov 1 Called the bond issue at 97, the rate provided in the bond indenture (Omit entry for payment of interest ) B Times interest earned The following data were taken from recent annual reports of Caliber Company, which operates a low fare airline service to more than 50 cities in the United States Current Year Preceding Year Interest expense $71,000 $78,000 Income before income tax 553,800 475,800 a Determine the times interest earned ratio for the current and preceding years Round to one decimal place Current year Preceding year b Although Caliber Company had enough earnings to pay interest in the preceding year, the (improvement or reduction) in this ratio will be (unwelcomed or welcomed) by the debtholders C Entries for Issuing Bonds and Amortizing Premium by Straight Line Method Daan Corporation wholesales repair products to equipment manufacturers On April 1, 2016, Daan Corporation issued $6,000,000 of 6 year, 6 bonds at a market (effective) interest rate of 3 , receiving cash of $6,981,677 Interest is payable semiannually on April 1 and October 1 a Journalize the entry to record the issuance of bonds on April 1, 2016 For a compound transaction, if an amount box does not require an entry, leave it blank b Journalize the entry to record the first interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight line method The bond premium amortization is combined with the semiannual interest payment (Round to the nearest dollar ) For a compound transaction, if an amount box does not require an entry, leave it blank c Why was the company able to issue the bonds for $6,981,677 rather than for the face amount of $6,000,000 The market rate of interest is (greater than less than) the contract rate of interest Issued the bonds for cash at their face amount 20Y1, May 1 Paid the interest on the bonds 20Y1, Nov 1 Called the bond issue at 97, the rate provided in the bond indenture (Omit entry for payment of interest ) For a compound transaction, if an amount box does not require an entry, leave it blank 20Y5, Nov 1

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A. Entries for Issuing and Calling Bonds; Gain Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,823,000 of 15-year,

Entries for Issuing and Calling Bonds; Gain

Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,823,000 of 15-year, 14% callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

Accounts payable/bonds payable/cash/gain on redemption of bonds/interest expense/loss of redemption/interest expense/interest payable/

Journalize the entries to record the following selected transactions:

20Y1
May 1	Issued the bonds for cash at their face amount.
Nov. 1	Paid the interest on the bonds.
20Y5
Nov. 1	Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Times interest earned

The following data were taken from recent annual reports of Caliber Company, which operates a low-fare airline service to more than 50 cities in the United States:

	Current Year	Preceding Year
Interest expense	$71,000	$78,000
Income before income tax	553,800	475,800

a. Determine the times interest earned ratio for the current and preceding years. Round to one decimal place.

Current year ?
Preceding year ?

b. Although Caliber Company had enough earnings to pay interest in the preceding year, the (improvement or reduction) in this ratio will be (unwelcomed or welcomed) by the

debtholders.

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method

Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $6,000,000 of 6-year, 6% bonds at a market (effective) interest rate of 3%, receiving cash of $6,981,677. Interest is payable semiannually on April 1 and October 1.

a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank.

b. Journalize the entry to record the first interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank.

c. Why was the company able to issue the bonds for $6,981,677 rather than for the face amount of $6,000,000?

The market rate of interest is (greater than/less than) the contract rate of interest.

Issued the bonds for cash at their face amount.

20Y1, May 1

Paid the interest on the bonds.

20Y1, Nov. 1

Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.) For a compound transaction, if an amount box does not require an entry, leave it blank.