Answer all questions in Problem 1.

(make sure answers follow the same format in the Example Format!!!)

ACCTG331\tComprehensive\tProblem\t1 Total\tPoints:\t20 Due\tDate:\tTuesday,\tJanuary\t26,\t2016\t(At\tthe\tbeginning\tof\tclass) Name:_______________________________ Wishful\tThinking\t(WT)\tSchool\tof\tManagement\tis\tbuilding\ta\tnew\tfacility\ton\ta\tpiece\tof\tdonated\tland. It\treceived\ta\tgenerous\tcash\tdonation\tfrom\ta\tlocal\tbusiness\tto\tsupport\tthe\tproject,\tand\tnow\tneeds\tto borrow\tadditional\t$12,000,000\tto\tcomplete\tthe\tproject.\tTherefore\tWT\tSchool\tof\tManagement issued\t$12,000,000\tof\t7.00%\t8year\tbonds.\tThese\tbonds\twere\tissued\ton\tJanuary\t1,\t2015,\tand\tpay interest\tannually\ton\teach\tJanuary\t1.\tThe\tbond\tyield\tis\t9.00%.\tWT\tSchool\tof\tManagement\tincurred $480,000\tin\tbond\tissue\tcosts\trelated\tto\tthe\tbond\tsale. (a) Prepare\tthe\tjournal\tentry\tto\trecord\tthe\tissuance\tof\tthe\tbonds\tand\tthe\trelated\tbond\tissue\tcosts incurred\ton\tJanuary\t1,\t2015\t(6\tpoints,\tshow\tyour\twork). Jan\t1,\t15 Present\tvalue\tof\tthe\tprincipal\t=\t$12,000,000\t\t0.50187=$6,022,440 (1pt) Present\tvalue\tof\tthe\tinterest\t=\t$840,000\t\t5.53482=$4,649,249 (1pt) Present\tselling\tvalue\tof\tthe\tbonds\t= $10,671,689 Jan\t1,\t15 Cash Unamortized\tBond\tIssue\tCosts Discount\ton\tBonds\tPayable Bonds\tPayable 10,191,689\t(1pt) 480,000\t(1pt) 1,328,311(1pt) 12,000,000\t(1pt) (b) Prepare\ta\tbond\tamortization\tschedule\tup\tto\tand\tincluding\tJanuary\t1,\t2019,\tusing\tthe\teffective interest\tmethod\t(4\tpoints). Bond Interest Interest Disc/Prem Carrying Value Date Paid Expense Amortization Jan\t1,\t15 $10,671,689 Jan\t1,\t16 $840,000 10,792,141\t(1pt) $960,452 $120,452 Jan\t1,\t17 840,000 10,923,433\t(1pt) 971,293 $131,293 Jan\t1,\t18 11,066,542\t(1pt) 840,000 983,109 $143,109 Jan\t1,\t19 840,000 11,222,531\t(1pt) 995,989 $155,989 1 (c) Assume\tthat\ton\tJuly\t1,\t2018,\tWT\tSchool\tof\tManagement\tretires\t60%\tof\tthe\tbonds\tat\ta\tcost\tof $7,200,000 plus accrued interest. Prepare journal entries to record this retirement (10 points,\tshow\tyour\twork). Entry\tfor\taccrued\tinterest\t(4\tpoints) Interest\tExpense Discount\ton\tBonds\tPayable Cash 298,797\t(2pt) 46,797\t(1pt) 252,000\t(1pt) Entry\tfor\treacquisition\t(6\tpoints) Bonds\tPayable Loss\ton\tRedemption\tof\tBonds Discount\ton\tBonds\tPayable Unamortized\tBond\tIssue\tCosts Cash 7,200,000\t(1pt) 675,278\t(1pt) 513,278\t(1pt) 162,000\t(2pt) 7,200,000\t(1pt) 2 ACCTG331\tComprehensive\tProblem\t1 Total\tPoints:\t20 Due\tDate:\tTuesday,\tJanuary\t24,\t2017\t(At\tthe\tbeginning\tof\tclass) Name:_______________________________ Wishful\tThinking\t(WT)\tSchool\tof\tManagement\tis\tbuilding\ta\tnew\tfacility\ton\ta\tpiece\tof\tdonated\tland. It\treceived\ta\tgenerous\tcash\tdonation\tfrom\ta\tlocal\tbusiness\tto\tsupport\tthe\tproject,\tand\tnow\tneeds\tto borrow\tadditional\t$10,000,000\tto\tcomplete\tthe\tproject.\tTherefore\tWT\tSchool\tof\tMgmt\tissued $10,000,000\tof\t6.00%\t10year\tbonds.\tThese\tbonds\twere\tissued\ton\tJanuary\t1,\t2016,\tand\tpay\tinterest annually\ton\teach\tJanuary\t1.\tThe\tbonds\tyield\t7.00%.\tWT\tSchool\tof\tMgmt\tincurred\t$600,000\tin\tbond issue\tcosts\trelated\tto\tthe\tbond\tsale\t(round\tup\tthe\tcalculation\tto\tthe\tnearest\tdollar). (a)\tPrepare\tthe\tjournal\tentry\tto\trecord\tthe\tissuance\tof\tthe\tbonds\tand\tthe\trelated\tbond\tissue\tcosts incurred\ton\tJanuary\t1,\t2016\t(6pts,\tshow\tyour\twork). (b)\tPrepare\ta\tbond\tamortization\tschedule\tup\tto\tand\tincluding\tJanuary\t1,\t2020,\tusing\tthe\teffective interest\tmethod\t(4pts). Bond Interest Interest Disc/Prem Carrying Date Paid Expense Amortization Jan\t1,\t16 Jan\t1,\t17 Jan\t1,\t18 Jan\t1,\t19 Jan\t1,\t20 1 (c)\tAssume\tthat\ton\tJuly\t1,\t2019,\tWT\tSchool\tof\tMgmt retires\t75%\tof\tthe\tbonds\tat\ta\tcost\tof\t$6,500,000 plus\taccrued\tinterest.\tPrepare\tjournal\tentries\tto\trecord\tthis\tretirement\t(10pts). 2