Question: Reporting Financial Statement Effects on Bond Transactions

Reporting Financial Statement Effects of Bond Transactions On January 1, 2016, McKeown, Inc., issued $350,000 of 12%, 9-year bonds for $314,793, yielding a market (yield) rate of 14%. Semiannual interest is payable on June 30 and December 31 of each year. Required a. Show computations to confirm the bond issue price. b. Prepare journal entries to record the bond issuance, semiannual interest payment and discount amortization on June 30, 2016, and semiannual interest payment and discount amortization on December 31, 2016. Use the effective interest rate method. c. Post the journal entries from part b to their respective T-accounts. d. Record each of the transactions from part b in the financial statement effects template. Confirm Bond Price Journal entries T-accounts Financial statement effects template Round your answer to nearest dollar. Present value of principal repayment $ Present value of interest payments $ Selling price of bonds $ 314793 Check Round your answers to the nearest dollar. General Journal Date Description Debit 01/01/16 Cash Credit . 6/30/16 . Cash 12/31/16 . Cash Check Cash (A) Bonds Payable (L) Interest Expense (E) Bond Discount (XL) 01/01/16 06/30/16 12/31/16 01/01/16 06/30/16 12/31/16 01/01/16 06/30/16 12/31/16 01/01/16 06/30/16 12/31/16 Note: Use negative signs with your answers, when needed. Balance Sheet Income Statement Noncash Asset Contra- Liabilities Contrib. Capital Earned Capital Cash Asset + Liabilities + Revenues Expenses = Net Income $ + $ $ $ $ $ $ Transaction 1/1/16 Issue bonds at a discount 6/30/16 Interest payment on bonds 12/31/16 Interest payment on bonds + $ $ + +