Exercise 7

Bond Amortization (Straight-Line Method)

Retrieve Exercise07.xls from class website. Make certain that you use the original parameters as the following:

a. Bond Face Value: $100,000 b. Contract Rate: 5% / year

c. Length of Bond: 15 years

d. Interest Payments per Year: 2 times per year on June 30 and December 31

e. Bond Selling at: 102 f. Issuance Date: January 1, 2009

1. Prepare a bond amortization table for BFSC Financial, assuming BFSC uses straight-line method for bond amortization. Print the bond amortization table in A9:G43 into one page with spreadsheet frames and in good format using the assumptions above.

2. Based on your Bond Amortization Table prepared in (1) above, prepare journal entries for the following dates. Print the journal entries in A1:D27 into one page and in good format (proper indentation, grids, and alignment.)

a. 1/1/2009 b. 6/30/2009 c. 7/1/2009 d. 6/30/2023

e. 7/1/2023 f. 12/31/2023 g. 1/1/2024

3. Change the assumption figures to the following values:

a. Bond Face Value: $1,500,000 b. Contract Rate: 6% / year

c. Length of Bond: 10 years

d. Interest Payments per Year: 4 times per year on Mar. 31, June 30, Sep. 30 and Dec. 31.

e. Bond Selling at: 98 f. Issuance Date: January 1, 2009

4. Prepare a bond amortization table for BFSC using new assumptions in (3). Print the spreadsheet area A9:G40 into one page without frames (but still with grids). Again, assume that Furman Financial Investments, Inc. uses straight-line method for amortization.

5. Based on your revised Bond Amortization Table prepared in (4) above, prepare journal entries for the following dates. Print the journal entries in A1:D21 in good format.

a. 1/1/2009 b. 3/31/2009 c. 4/1/2009 d. 12/31/2018

e. 1/1/2019

6. Refer to the bond amortization table in (4). If the company retires half of the bonds payable on 7/1/2012 at 97, prepare necessary journal entry(ies) for the following dates:

a. 6/30/2012 b. 7/1/2012 c. 12/31/2012 d. 12/31/2018

e. 1/1/2019

7. Again, refer to the bond amortization table in (4). If the company retires one-third of the bonds payable on 12/1/2013 at 101, prepare necessary journal entry(ies) for the following dates:

a. 11/30/2013 b. 12/1/2013 c. 12/31/2013 d. 12/31/2018

e. 1/1/2019

Required:

Turn in printouts from Steps 1, 2, and 4-8 in good format. Save the results as Exercise07.xls.