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Entries forBondsPayable andInstallment NoteTransactions The following transactions were completed by Hobson Inc., whose fiscal year is the calendar year: 2014 July1. Issued $8,760,000 of five-year,
Entries forBondsPayable andInstallment NoteTransactions
The following transactions were completed by Hobson Inc., whose fiscal year is the calendar year:
2014 | |
July1. | Issued $8,760,000 of five-year, 6% callable bonds dated July 1, 2014, at a market (effective) rate of 7%, receiving cash of $8,395,733. Interest is payable semiannually on December 31 and June 30. |
Oct.1. | Borrowed $360,000 as a 10-year, 6% installment note from Marble Bank. The note requires annual payments of $48,912, with the first payment occurring on September 30, 2015. |
Dec.31. | Accrued $5,400 of interest on the installment note. The interest is payable on the date of the next installment note payment. |
Dec.31. | Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry. |
Dec.31. | Recorded bonddiscountamortization of $36,427, which was determined using the straight-line method. |
Dec.31. | Closed the interest expense account. |
2015 | |
June30. | Paid the semiannual interest on the bonds. |
Sept.30. | Paid the annual payment on the note, which consisted of interest of $21,600 and principal of $27,312. |
Dec.31. | Accrued $4,990 of interest on the installment note. The interest is payable on the date of the next installment note payment. |
Dec.31. | Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry. |
Dec.31. | Recorded bond discount amortization of $72,853, which was determined using the straight-line method. |
Dec.31. | Closed the interest expense account. |
2016 | |
June30. | Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $218,561 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) |
Sept.30. | Paid the second annual payment on the note, which consisted of interest of $19,961 and principal of $28,951. |
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