Introduction This is the fourth in a series of exercises designed to assist you in building and applying your accounting knowledge. Though the structure and composition may differ, almost all companies have both current and long-term liabilities. Knowing how to account for these liabilities and related transactions is essential. Assignment P1. Vieques Corporation sells scenic sightseeing trips to rural towns in Puerto Rico. Over the last several years, the company has become interested in purchasing a used airplane. Instead of issuing common stock, the company decides to issue bonds. The company issued $1,000,000 of 8% three-year bonds at 97 on January 1, 2018. Interest is paid semiannually on January 1 and July 1. Vieques Corporation uses the straight-line method of amortization. The corporation would like to better understand the bond issue. Using the table below as a guide, calculate the interest expense, amortization of any discount, and the carrying value of the bond at the end of each year for the life of the bond. Date Interest expense Amortization of discount Discount Carrying value of bond Jan. 1, 2018 Jul. 1, 2018 Dec. 31, 2018 Jul. 1, 2019 Dec. 31, 2019 Jul. 1, 2020 Dec. 31, 2020 Make the appropriate journal entries for each of the following events: o 2018 January 1 Bond issuance July 1 Interest payment December 31 Record any accrued interest on the bonds o 2020 December 31 Bond redemption at maturity (Continued on next page)

ACCT 2010: Accounting I Exercise #3 P2. Vieques Corporation issues even more bonds. The stated rate on the bond exceeds the market rate. The company issued $150,000 of 9% three-year bonds at 101 on January 1, 2018. Interest is paid semiannually on January 1 and July 1. Woodworker uses the straight-line method of amortization. The corporation would like to better understand the bond issue. Using the table below as a guide, calculate the interest expense, amortization of any premium, and the carrying value of the bond at the end of each year for the life of the bond. Date Interest expense Amortization of premium Premium Carrying value of bond Jan. 1, 2018 Jul. 1, 2018 Dec. 31, 2018 Jul. 1, 2019 Dec. 31, 2019 Jul. 1, 2020 Dec. 31, 2020 Make the appropriate journal entries for each of the following events: o 2018 January 1 Bond issuance July 1 Interest payment December 31 Record any accrued interest on the bonds o 2020 December 31 Bond redemption at maturity Submission Please structure your tables to be similar to the ones above. You can copy and paste the blank tables if you like. Type your journal entries below the tables or include them separately.