Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On July 1, 2016, Merideth Industries Inc. issued $30,000,000 of 10-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $28,130,684.

On July 1, 2016, Merideth Industries Inc. issued $30,000,000 of 10-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $28,130,684. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2016.*
2. Journalize the entries to record the following:*
a. The first semiannual interest payment on December 31, 2016, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2017, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 2016.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
5. Compute the price of $28,130,684 received for the bonds by using the tables shown in Present Value Tables. (Round to the nearest dollar.)
*Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS
Merideth Industries Inc.
General Ledger
ASSETS
110 Cash
111 Petty Cash
121 Accounts Receivable
122 Allowance for Doubtful Accounts
126 Interest Receivable
127 Notes Receivable
131 Merchandise Inventory
141 Office Supplies
142 Store Supplies
151 Prepaid Insurance
191 Land
192 Store Equipment
193 Accumulated Depreciation-Store Equipment
194 Office Equipment
195 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
221 Salaries Payable
231 Sales Tax Payable
232 Interest Payable
241 Notes Payable
251 Bonds Payable
252 Discount on Bonds Payable
253 Premium on Bonds Payable
EQUITY
311 Common Stock
312 Paid-In Capital in Excess of Par-Common Stock
315 Treasury Stock
321 Preferred Stock
322 Paid-In Capital in Excess of Par-Preferred Stock
331 Paid-In Capital from Sale of Treasury Stock
340 Retained Earnings
351 Cash Dividends
352 Stock Dividends
390 Income Summary
REVENUE
410 Sales
610 Interest Revenue
611 Gain on Redemption of Bonds

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Integrated Audit Practice Case

Authors: David S. Kerr, Randal J. Elder, Alvin A. Arens

5th Edition

0912503351, 9780912503356

More Books

Students also viewed these Accounting questions

Question

Oblique asymptote y = x - 1?

Answered: 1 week ago

Question

Describe the importance of global talent management.

Answered: 1 week ago

Question

Summarize the environment of recruitment.

Answered: 1 week ago