Question 5

1. On April 1, 2022, Larel Corporation issued $40,000, 9%, ten-year bonds payable at 108 that were dated April 1, 2022. Interest is payable each March 31 and September 30. (a) Give the entry to record the issuance of the bonds on April 1, 2022 (b) Give the entry to record the first interest payment on September 30, 2022. Use straight-line amortization (c) Give the adjusting entry required on December 31, 2022, the end of the annual accounting period. Use straight-line amortization

2. Lamar Company authorized a $500,000, five-year, 12% bond issue dated October 1, 20X1, with semi-annual interest to be paid each September 30 and March 31. On October 1, 20X1, the bonds were issued (sold) for $497,340. (a) Give the entry to record the sale of the bonds. (b) It is December 31, 20X1, the end of the accounting period. Give the required adjusting entry using straight-line amortization (c) Was the bond sold at par, at a discount or at a premium? (d) Will interest expense be greater than or less than the cash payments for interest?