The Sleepy Corporation issued $1,000,000 of ten year bonds on January 1, 2019. The interest rate on the bonds is 9%, and the interest is paid semi-annually on July 1 and January of each year. The bonds were issued at 102. The straight-line method for amortizing discounts and premiums is used.

a. Were the bonds issued at a discount or premium?

b. Prepare the journal entries on

1. January 1, the date the bonds were issued

2. December 31, 2019, for the year end journal entry to record interest expense and amortization of discount/premium

c. Calculate the total amount of interest expense on the 2019 income statement.

d. Calculate the carry value of the bonds on December 31, 2019

PROBLEM 3

For the following independent cases, in the space provided, calculate the amount of revenue that should be recorded in 2019 under the revenue recognition principle (point of sale).

1. Company A rents office space to tenants. On October 1, 2019 they collected $18,000 from a tenant which represents 12 month’s rent paid in advance.

2. Company B sells heavy equipment. On December 1, 2019 a customer paid a $10,000 deposit towards the purchase of a $50,000 piece of equipment. The equipment was delivered on January 16, 2020 and the balance was paid that date.

3. On December 29, 2019 Company C ships $15,000 worth of goods to a customer, F. O.B. destination. The goods arrive on January 3, 2020at the customer’s office. The customer pays for the goods On February 1, 2020.

4. Company D provides legal services for clients. On December 2, 2019 a client hires the firm and pays a $10,000 advance payment. The firm did $4,000 of service in 2019.

  

 

Problem 2 CR85-55555 = OUAWN- 1|| (a) Date 3 (b)1. 6 (b)2. 11 c. 17 d. Account Titles Debit Credit 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 in A 25