Analyzing and Reporting Financial Statement Effects of Bond Transactions

On January 1, Trueman Corp. issued $480,000 of 20-year, 11% bonds for $443,888, yielding a market ( yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.

a. Prepare the journal entries for transactions described above.

Date	Account	Debit	Credit
Jan. 1		Answer	Answer
		Answer	Answer
		Answer	Answer
Jun. 30		Answer	Answer
		Answer	Answer
		Answer	Answer
Dec. 31		Answer	Answer
		Answer	Answer
		Answer	Answer

Note:Round your answers to the nearest whole dollar.

b. Post the journal entries to their respective T-accounts. Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account.

Cash
	Answer	Answer
	Answer	Answer

Bonds payable
	Answer	Answer
	Answer	Answer

Interest expense
	Answer	Answer
	Answer	Answer

Bond discount
	Answer	Answer
	Answer	Answer

c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value.

Date	Account	Debit	Credit
Dec. 31	Bond discountBond premiumBonds payableCashFair value adjustmentGain to adjust bonds to fair valueInterest expenseInterest payableLoss to adjust bonds to fair valueRetained earningsN/A		Answer
	Bond discountBond premiumBonds payableCashFair value adjustmentGain to adjust bonds to fair valueInterest expenseInterest payableLoss to adjust bonds to fair valueRetained earningsN/A		Answer
	To record fair value adjustment.