During Year 1 and Year 2, Agatha Corporation completed the following transactions relating to its bond issue. The corporations fiscal year is the calendar year. Year 1
January 1 | Issued $230,000 of 10-year, 6 percent bonds for $221,000. The annual cash payment for interest is due on December 31. |
December 31 | Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. |
December 31 | Closed the interest expense account. |
Year 2
December 31 | Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. |
December 31 | Closed the interest expense account. |
Required a-1. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? a-2. If Agatha had sold the bonds at their face amount, what amount of cash would Agatha have received? b. Prepare the general journal entries for the above transactions. c. Prepare the liabilities section of the balance sheet at December 31, Year 1 and Year 2. d. Determine the amount of interest expense that will be reported on the income statements for Year 1 and Year 2. e. Determine the amount of interest that will be paid in cash to the bondholders in Year 1 and Year 2.
During Year 1 and Year 2, Agatha Corporation completed the following transactions relating to its bond issue. The corporation's fiscal year is the calendar year. Year 1 January 1 Issued $230,000 of 10 -year, 6 percent bonds for $221,000. The annual cash payment for interest is due on December 31. December 31 Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. December 31 Closed the interest expense account. Year 2 December 31 Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. December 31 Closed the interest expense account. Required a-1. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? a-2. If Agatha had sold the bonds at their face amount, what amount of cash would Agatha have received? b. Prepare the general journal entries for the above transactions. c. Prepare the liabilities section of the balance sheet at December 31, Year 1 and Year 2. d. Determine the amount of interest expense that will be reported on the income statements for Year 1 and Year 2. e. Determine the amount of interest that will be paid in cash to the bondholders in Year 1 and Year 2 . Answer is not complete. Complete this question by entering your answers in the tabs below. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? Mrepare the general journal entnes for the above transactions. joumal entry required" in the first account field.) \begin{tabular}{|c|c|c|c|c|c|} \hline No & Date & General & & Debit & Crodit \\ \hline \multirow[t]{3}{*}{1} & January, Year 1 & Cash & 0 & 221,0000 & \\ \hline & & Discount on bonds payable & 0 & 9.0000 & \\ \hline & & Bonds payable & 0 & & 230,0000 \\ \hline \multirow[t]{3}{*}{2} & December, Year1 & interest exponse & & 13,800 & \\ \hline & & Discount on bonds payable & 0 & & 9000 \\ \hline & & Cash & 0 & & 12,900 \\ \hline \multirow[t]{2}{*}{3} & December, Year 1 & Retained eamings & 0 & 13,800 & \\ \hline & & Interest expense & 0 & & 13,800 \\ \hline \multirow[t]{3}{*}{4} & December, Year 2 & Interest expense & 0 & 13,800 & \\ \hline & & Discount on bonds payable & 0 & & 9000 \\ \hline & & Cash & 0 & & 12,900 \\ \hline \multirow[t]{2}{*}{5} & December, Year 2 & Bonds payable & & 13,800 & \\ \hline & & Interest expense. & 0 & & 13,800 \\ \hline \end{tabular} Prepare the liabilities section of the balance sheet at December 31, Year 1 and Year 2. (Amounts to be ded indicated with minus sign.) Complete this question by entering your answers in the tibs below. Determine the amount of interest expense that will be reported on the income statements for Year 1 and Year 2. Determine the amount of interest that will be paid in cash to the bondholders in Year 1 and Year 2