Question
Spring Water Company Ltd. needed to raise $65 million of additional capital to finance the expansion of its bottled water facility. After consulting an investment
Spring Water Company Ltd. needed to raise $65 million of additional capital to finance the expansion of its bottled water facility. After consulting an investment banker, it decided to issue bonds. The bonds had a face value of $65 million and an annual interest rate of 4.5%, paid semi-annually on June 30 and December 31, and will reach maturity on December 31, 2030. The bonds were issued at 96.1 on January 1, 2021, for $62,465,000, which represented a yield of 5%.
a) Show the journal entry to record the issuance of the bonds
Account Titles and Explanation Debit Credit
b) Show the journal entries to record the first two interest payments. Ignore year-end accruals of interest.
Date Account Titles and Explanation Debit Credit
June 30
December 31
c) What amount will be reported on the statement of financial position at the end of the first year related to these bonds
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started