Question

Problem# 1: The Bugs Bunny Company issued $1,000,000 in bonds at face value on April 1, 2020. The bonds pay a contract (stated) rate of interest of 8% which is also the market (effective) rate at the time of issue, interest is paid twice per year on October 1st and April 1st, and the bonds mature on April 1, 2030. bugs Bunny's accounting year ends on December 31". In the space provide below, prepare the following journal entries: (1) when the bonds were issued on April 1, 2020; (2) the first interest payment date on October 1, 2020; and, (3) the adjusting entry needed on December 31, 2020. Accounts Debits Credits Date Apr 1, 2020 Oct 1, 2020 Dec 31, 2020 Problem# 2: The Daily Duck Company has established a defined contribution pension plan for their employees. Daffy Duck is required to make quarterly contributions equal to 4% of wages earned each calendar quarter, and the amounts must be paid by the 15 day following the end of each quarter. For the quarter ended December 31, 2020, employees earned $2,000,000 in wages. Daffy's fiscal year is the calendar year. In the space provided below, prepare the following journal entries relative to the pension plan: (1) the adjusting entry on December 31, 2020; and, (2) the January 15, 2021 cash payment. Accounts Debits Credits Date Dec 31, 2020 Jan 15, 2021

Answer 1

Date	Accounts	Debit	Credit
Apr 1, 2020	Cash	$1,000,000
	Bonds Payable		$1,000,000
	(To record issue of bonds payable)
Oct 1, 2020	Interest Expense ($1,000,000 x 4%)	$40,000
	Cash		$40,000
	(To record interest expenses)
Dec 31, 2020	Interest Expense ($1,000,000 x 4% x 1/2)	$20,000
	Cash		$20,000
	(To record interest payable)
Date	Accounts	Debit	Credit
Dec 31, 2020	Pension Expense ($2,000,000 x 4%)	$80,000
	Accrued Pension Liability		$80,000
	(To record pension expense)
Jan 15, 2021	Accrued Pension Liability	$80,000
	Cash		$80,000
	(To record payment of pension expense)