Problem 1

Company: XYZ Company

Date of bonds: January 1, 2020

Term: 5 years

Face (Par) Value: $100,000

Stated interest rate: 10%

Interest payment dates on January 1 and July 1

The effective interest rate (market yield) is 8%.

(Use the present value tables on pages 558-559 exhibits 5&7)

1. Compute the market price of the bonds and make the journal entry to record the issuance of the bonds.

2. The company uses the effective interest method of amortization. Prepare a schedule to amortize the bond premium or discount from January 1, 2020 to January 1, 2021 and make the journal entries for the July 1, 2020 and January 1, 2021. Interest expense for the year ended December 31, 2020 is $______________.

Problem 2

On January 1, XYZ Magazine purchased 10 rolls of paper on account at $200 per roll for use in production of the January issue of two magazines (Student Monthly (SM) & Beach Life (BL)). During January, 4 rolls of paper were issued to the SM job and 2 rolls to the BL job in the printing department. Workers in the printing department logged 25 hours and 10 hours in SM and BL, respectively, at a labor rate of $25 per hour. XYZ Manufacturing expected to incur $200,000 of total factory overhead costs for the year and 20,000 hours of direct labor and allocates factory overhead based on direct labor hours, On January 31, the SM magazine was completed and shipped to the magazine stand with an invoice for $5,000. The BL magazine was completed but not sold.

Journalize the following (using T-Accounts as necessary):

1. The purchase of the paper.

2. The transfer of raw materials to work in process (jobs).

3. The application of direct labor to jobs

4. The application of factory overhead to jobs.

5. The transfer of jobs based on progress.

6. Inventory balances at January 31:

Materials $_________________

Work in Process $___________

Finished Goods $____________

Gross profit on the Student Monthly magazine was $____________.

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