Question
The XYZ Co. sold $3,000,000, 8%, 10 year bonds on January 1, 2018. The bonds were dated January 1, 2018, and pay interest on January
The XYZ Co. sold $3,000,000, 8%, 10 year bonds on January 1, 2018. The bonds were dated January 1, 2018, and pay interest on January 1. The company uses the effective interest method to amortize bond premiums and discounts. Financial statements are prepared annually.
Instructions
a) Prepare the journal entries to record the issuance of the bonds assuming they are sold at:
(1) 103 (i.e. 103% of face) due to the market interest rate of 7%
(2) 98 (i.e. 98% of face) due to the market interest rate of 8.5%
b) Prepare amortization tables for both assumed sales for the first three interest payments.
c) Prepare the journal entries to record interest expense for 2018 under both of the bond issuances assumed in part (a).
d) Show the long-term liabilities balance sheet presentation for both of the bond issuances assumed in part (a) at December 31, 2018
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Advanced Accounting
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni
13th edition
1259444953, 978-1259444951
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