Required:

1. Prepare the journal entry to record the issuance of the bonds on April 1, 2016. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

2016

Apr. 1

Cash

1290000

+

NE

NE

NE

NE

NE

Bonds payable

1290000

NE

+

NE

NE

NE

NE

2. Prepare the journal entry to record the interest payment on October 1, 2016. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

2016

Oct. 1

Cash

Interest payable

3. On December 31, Brand should Multiple choice:

- record an accrued liability to recognize the interest expense incurred but not paid from October 1 to December 31.

- not record any expense related to the interest on the loan since it is not due until April 1st of the following year.

- record a cash payment of three months' of interest to reflect interest for the period from October 1 to December 31.

- record an accrued liability of six months' interest from October 1 until April 1st, and as a result, it will pay half of this amount on April 1st with the other half being paid on

December 31st.

4. Determine the total cash inflows and outflows that occurred on the bonds over the eight-year life.

Total cash inflows	$
Total cash outflows	$