Bond Premium, Entries for Bonds Payable Transactions

Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $87,300,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $92,977,730. 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 on July 1, 20Y1.

	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable	- Select -	- Select -
	Accounts PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable	- Select -	- Select -
	Accounts PayableBonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest Payable	- Select -	- Select -

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 straight-line method. Round to the nearest dollar.

	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayableInterest Receivable	- Select -	- Select -
	Bonds PayableCashDiscount on Bonds PayableInterest PayableInterest ReceivablePremium on Bonds Payable	- Select -	- Select -
	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable	- Select -	- Select -

b. The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.

	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayableInterest Receivable	- Select -	- Select -
	Bonds PayableCashDiscount on Bonds PayableInterest PayableInterest ReceivablePremium on Bonds Payable	- Select -	- Select -
	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable	- Select -	- Select -

3. Determine the total interest expense for 20Y1. Round to the nearest dollar. $fill in the blank 21716cf57fcb068_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?

YesNo

5. Compute the price of $92,977,730 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount	$fill in the blank 21716cf57fcb068_3
Present value of the semi-annual interest payments	fill in the blank 21716cf57fcb068_4
Price received for the bonds	$fill in the blank 21716cf57fcb068_5