Question
The Sleepy Corporation issued $1,000,000 of ten year bonds on January 1, 2019. The interest rate on the bonds is 9%, and the interest is
The Sleepy Corporation issued $1,000,000 of ten year bonds on January 1, 2019. The interest rate on the bonds is 9%, and the interest is paid semi-annually on July 1 and January of each year. The bonds were issued at 102. The straight-line method for amortizing discounts and premiums is used.
a. Were the bonds issued at a discount or premium?
b. Prepare the journal entries on
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January 1, the date the bonds were issued
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December 31, 2019, for the year end journal entry to record interest expense and amortization of discount/premium
c. Calculate the total amount of interest expense on the 2019 income statement.
d. Calculate the carry value of the bonds on December 31, 2019
PROBLEM 3
For the following independent cases, in the space provided, calculate the amount of revenue that should be recorded in 2019 under the revenue recognition principle (point of sale).
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Company A rents office space to tenants. On October 1, 2019 they collected $18,000 from a tenant which represents 12 months rent paid in advance.
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Company B sells heavy equipment. On December 1, 2019 a customer paid a $10,000 deposit towards the purchase of a $50,000 piece of equipment. The equipment was delivered on January 16, 2020 and the balance was paid that date.
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On December 29, 2019 Company C ships $15,000 worth of goods to a customer, F. O.B. destination. The goods arrive on January 3, 2020at the customers office. The customer pays for the goods On February 1, 2020.
4. Company D provides legal services for clients. On December 2, 2019 a client hires the firm and pays a $10,000 advance payment. The firm did $4,000 of service in 2019.
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