EXERCISE 8 UPDATED WITH QUESTIONS

Assumptions:

Bond Face Value 1200000

Contract Rate 0.1

Effective Interest Rate 0.12

Length of Bond 10 Years

Payments/Year 1

Bond Issuance Price 1119479

Issurance Date 1/1/2010

ATD Corporation

Bond Amortization Table

Effective-Interest Rate Method, Yea r 2010-2019

Date Interest Payable Interest Expense Bond Amortization Unamortized Amount Bond Carrying Value

1/1/2010

12/31/2010

Exercise 8

Bond Amortization (Straight-Line and Effective Interest Methods)

ATD Corporation starts its business in July 1, 2009 in Buford, GA to produce and sell mobile homes. On July 1, 2009, ATD Corporation issued $1,200,000 of ten-year, 12% bonds at an effective interest rate of 10%. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

1. Based on the above information, prepare the initial journal entry by ATD Corporation to record the issuance of bonds on July 1, 2009. Please show supporting computations in Excel for your journal entry.

2. Suppose ATD Corporation uses straight-line method for bond amortization, prepare a bond amortization table on the worksheet for ATD. Print the amortization table in goof format.

3. Based on the table in (2), prepare journal necessary journal entry(ies) for ATD for the following dates:

a. 12/31/2009

b. 1/1/2010

c. 12/31/2014

d. 6/30/2019

e. 7/1/2019 when ATD paid off its bonds payable.

4. Based on the table in (2), suppose ATD retires half of its bonds on October 1, 2015 at 102, prepare necessary journal entry(ies) for ATD for the following dates:

a. 9/30/2015 b. 10/1/2015 c. 6/30/2019 d. 7/1/2019

5. Suppose ATD Corporation uses effective-interest method for bond amortization, prepare a bond amortization table on the worksheet for ATD. Print the amortization table in goof format.

6. Based on the table in (2), prepare journal necessary journal entry(ies) for ATD for the following dates:

a. 12/31/2009 b. 1/1/2010 c. 12/31/2014 d. 6/30/2019 e. 7/1/2019 when ATD paid off its bonds payable.

7. Based on the table in (5), suppose ATD retires half of its bonds on October 1, 2015 at 102, prepare necessary journal entry(ies) for ATD for the following dates:

a. 9/30/2015 b. 10/1/2015 c. 6/30/2019 d. 7/1/2019

Required: Turn in printouts from Steps 1-7 in good format.