Question
Use the following information to answer all 10 questions: On January 1, 2012, Buchholz Corporation issued bonds with a face value of $350,000 and stated
Use the following information to answer all 10 questions:
On January 1, 2012, Buchholz Corporation issued bonds with a face value of $350,000 and stated interest of 5%. At the time of issuance, the market rate of interest was 4%. The bonds mature in 6 years. The bonds pay interest semi-annually on June 30 and December 31st of each year.
1) When Buchholz Corporation issues the bonds on January 1, 2012, its total liabilities increase. T or F
2) The bonds issued by Buchholz Corporation will be issued at a premium. T or F
3) What is the issue price of the bonds?
4) What is the carrying value of the bonds on December 31, 2015?
5) How much interest expense will be recognized on June 30, 2014?
6) How much interest expense will be reported on the income statement for the calendar year ended December 31, 2017?
7) How much cash will be paid to bond investors on December 31, 2014?
8) The journal entry to record the issuance of the bonds on January 1, 2012 would include:
-A debit to cash for $350,000.?
-A debit to bond premium.?
-A debit to bond discount.?
-A credit to bond payable for $350,000.?
9) The journal entry required on June 30, 2016 would include which of the following:
-A credit to interest expense for $7,133.?
-A credit to interest payable.?
-A credit to cash for $8,750.?
-A credit to cash for $7,133?
10) The journal entry required to retire the bonds at maturity on December 31, 2017 would be:
-Debit cash and credit bonds payable for $350,000.?
-Debit bond payable and credit cash for $350,000.?
-Debit prepaid interest.?
-Debit unearned revenue?
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