Bond Premium, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Premium Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $85,000,000 of 20-year, 14% bonds at a market (effective) interest rate of 12%, receiving cash of $97,768,700. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds. 20Y1 July 1 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the interest method. Round to the nearest dollar. 20Y1 Dec. 31 b. The interest payment on June 30, 2012, and the amortization of the bond premium, using the interest method. Round to the nearest dollar. 20Y2 June 30 3. Determine the total interest expense for 20Y1. Round to the nearest dollar. Bond Premium, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Premium Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $85,000,000 of 20-year, 14% bonds at a market (effective) interest rate of 12%, receiving cash of $97,768,700. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds. 20Y1 July 1 88 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the interest method. Round to the nearest dollar. 20Y1 Dec. 31 b. The interest payment on June 30, 2012, and the amortization of the bond premium, using the interest method. Round to the nearest dollar. 20Y2 June 30 3. Determine the total interest expense for 20Y1. Round to the nearest dollar. Mastery Problem: Liabilities: Bonds Payable SpringFit Corporation You are an accounting intern working for SpringFit Corporation. You have recently been assigned to help one of the accountants who is doing an internal audit of the business. You will be assisting with a review of the payables issued by SpringFit Corporation. Your first task is to review the previous year's journal entries, shown as follows: Journal Entries, Year 1 Date Jan. 1 Cash Journal Description Debit Credit 1,062,060 Premium on Bonds Payable Bonds Payable 62,060 1,000,000 Jun. 30 Interest Expense 19,397 Premium on Bonds Payable Cash 3,103 22,500 Jul. 1 Cash 1,729,164 Discount on Bonds Payable Bonds Payable 70,836 1,800,000 Dec. 31 Interest Expense 19,397 Premium on Bonds Payable Cash 3,103 22,500 31 Interest Expense 37,403 Discount on Bonds Payable Cash 5,903 31,500 31 Retained Earnings Interest Expense 76,197 76,197 Bonds Payable Review the journal entries on the SpringFit Corporation panel, then answer the following questions. 1. Assuming that no bonds had been issued prior to Year 1, how many different bonds appear in the journal entries for this year? 2 Bonds Payable Review the journal entries on the SpringFit Corporation panel, then answer the following questions. 1. Assuming that no bonds had been issued prior to Year 1, how many different bonds appear in the journal entries for this year? 2 2. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date. July 1 3. How much interest was paid during the year on the bonds in question (2)? 31,500 4. What is the carrying amount of the bonds in question (2) at the end of the year? 37,403 X 5. Which entry shows bonds that sold for more than their face amount? Choose the date. Jan. 1 6. How much interest was paid during the year on the bonds in question (5)? 7. Assuming that straight-line amortization is used for the bonds in question (5), what is the bond life? 10 years 8. What is the carrying value of the bonds in question (5) at the end of the year? Feedback