Bond Premium, Entries for Bonds Payable Transactions Instructions O'Halloran Inc. produces and sells outdoor equipment. On July 1, Year 1, O'Halloran Inc. issued $60,400,000 of 10-year, 12\% bonds at a market (effective) interest rate of 11\%, receiving cash of $64,009,069. Interest on the bonds is payable semiannually on December 31 and June 30 . The fiscal year of the company is the calendar year. Required: 1. Joumalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1, 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31 , Year 1 , and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. b. The interest payment on June 30 , Year 2 , and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $64,009,069 received for the bonds by using the tables shown in Present Value Tables. Round to the nearest dollar. "Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Present Value Tables Two present value tables are provided: Present Value of $1 at Compound Interest Due in n Periods and Present Value of Ordinary Annuity of $1 per Period. Use them as directed in the problem requirements. Present Value of $1 at Compound Interest Due in n Periods Present Value of Ordinary Annuity of $1 per Period O'Halloran Inc. General Ledger ASSETS REVENUE 110 Cash 410 Sales 111 Petty Cash 610 Interest Revenue 121 Accounts Receivable 611 Gain on Redemption of Bonds 122 Allowance for Doubtful Accounts 126 Interest Receivable EXPENSES 127 Notes Receivable 510 Cost of Merchandise Sold 131 Merchandise Inventory 515 Credit Card Expense 141 Office Supplies 516 Cash Short and Over 142 Store Supplies 521 Sales Salaries Expense 151 Prepaid Insurance 522 Office Salaries Expense 191 Land 531 Advertising Expense 192 Store Equipment 532 Delivery Expense 193 Accumulated Depreciation-Store Equipment 533 Repairs Expense 194 Office Equipment 534 Selling Expenses 195 Accumulated Depreciation-Office Equipment 535 Rent Expense 536 Insurance Expense LIABILITIES 537 Office Supplies Expense 210 Accounts Payable 538 Store Supplies Expense 221 Salaries Payable 541 Bad Debt Expense 231 Sales Tax Payable 561 Depreciation Expense-Store Equipment 210 Accounts Payable 538 Store Supplies Expense 221 Salaries Payable 541 Bad Debt Expense 231 Sales Tax Payable 561 Depreciation Expense-Store Equipment 232 Interest Payable 562 Depreciation Expense-Office Equipment 241 Notes Payable 590 Miscellaneous Expense 251 Bonds Payable 710 Interest Expense 252 Discount on Bonds Payable 711 Loss on Redemption of Bonds 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. Refer to the chart of accounts for the exact wording of the account titles CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Round to the nearest dollar. 2b. Journalize the entry to record the interest payment on June 30 , Year 2, and the amortization of the bond premium, using the straight-line method. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Round to the nearest dollar. Question not attempted. 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be greater than the face amount of the bonds wh Yes No
