Question

PART VI LIABILITY EROULEMS (15 points) Chapter 9 and Chapter 10 Instructions: Complete the requirements specified for each o situations On January 1, carry a stated interest of 6% payable each January 1, Prepare issuance of the bonds if the bonds are issued at 98.5 2014, Wicker World issued bonds with a face value of $200.000. The bonds the journal entry for the Strike Zone Fishing purchased $50,000 of its own bonds on June 30, 2014, at 101 and immediately retired them. The carrying value of the bonds on the retirement date was $51,500. The bonds pay semiannual interest and the interest payment due on June 30, has been made and recorded. Prepare the entry for the retirement of the bonds. 2. 2014, 3. On April 1, the Mactors Company borrows $80,000 from New National Bank by signing a 6- month, 5%, interest-bearing note. (a) Prepare the entry on April 1 when the note was issued. (b) Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made.

Answer 1

Answer 1:

Face value of bonds issued = $200,000

Bonds were issued at 98.5

Bond value at Issue = $200,000 * 98.5% = $197,000

Discount on bonds payable = $200,000 - $197,000 = $3,000

Account Title and explanation Discount on Bonds Payable (to record issues of bond at discount) Date Debit Credit Januarv. 1, 2014 Cash $197,000 $3,000 Bonds Payable $200,000

Answer 2:

Answer 3(a):

Account Title and explanation Cash Debit Credit April. 1 $80,000 Notes Payable $80,000 (to record 6-month notes payable at 5% rate of interest)

Answer 3(b):

On June 30, Interest accrued on notes payable = $80,000 * 5% * 3/12 =$1,000