Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
Part 1 -- Bonds: National Company issued a 7.5% bond, dated January 1, 2020 with a face amount of $600,000 on January 1, 2020. The
Part 1 -- Bonds:
- National Company issued a 7.5% bond, dated January 1, 2020 with a face amount of $600,000 on January 1, 2020. The bonds mature on December 31, 2026. The market yield for bonds of similar risk and maturity was 5.5%. Interest is made semiannually on June 30 and December 31.
REQUIRED:
- Determine the price of the bonds at January 1, 2020 (be certain to include all of the Given information as discussed in class).
- Prepare a bond amortization table using the effective interest method (as reviewed in class), and make certain to obtain totals for the columns of Cash Interest Paid, Interest Expense, and Premium Amortization.
- Prepare the journal entry to record their issuance by National Company on January 1, 2020.
- Prepare the journal entry recording the first interest payment on June 30, 2020.
- Prepare the journal entry recording the interest payment on December 31, 2020.
- Prepare journal entries at maturity on December 31, 2026.
- Prepare the journal entry to record the retirement of the bond at a call price of $640,000 on January 1, 2023.
- Instead of retirement of the bond as described in g above, assume the bond was retired @108 call price on January 1, 2023. Prepare the journal entry to record this retirement of the bond.
Part 2 -- Installment note:
- On January 1, 2020 National Company signed a $500,000, 7% installment note to be repaid with 8 equal annual installments to be first made on December 31, 2020, and then every December 31 thereafter.
REQUIRED:
- Determine the amount of each annual payment.
- Prepare an amortization table for this installment note (as reviewed in class).
- Prepare the journal entry for the issuance of the installment note.
- Prepare the journal entry for the first payment on the note.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started