P14-5, P14-6, and P14-7
P14-5 (Complete Bond Drawback) In
every of the next impartial instances the corporate closes its 5 books on
December 31.
1. Sanford Co. sells $500,000 of 10%
bonds on March 1, 2014. The bonds pay curiosity on September 1 and March 1. The
due date of the bonds is September 1, 2017. The bonds yield 12%. Give entries
by way of December 31, 2015.
2. Titania Co. sells $400,000 of 12%
bonds on June 1, 2014. The bonds pay curiosity on December 1 and June 1. The due
date of the bonds is June 1, 2018. The bonds yield 10%. On October 1, 2015,
Titania buys again $120,000 value of bonds for $126,000 (contains accrued
curiosity). Give entries by way of December 1, 2016.
Directions
For the 2 instances put together the entire
related journal entries from the time of sale till the date indicated. Use
the effective-interest methodology for low cost and premium amortization (assemble
amortization tables the place relevant). Amortize premium or low cost on curiosity
dates and at year-end. (Assume that no reversing entries have been made.)
P14-6 (Issuance of Bonds between
Curiosity Dates, Straight-Line, Redemption) Introduced under are chosen
transactions on the books of Simonson Company.
Could 1, 2014
Dec. 31
Jan. 1, 2015 April 1
Dec. 31
Directions
Bonds payable with a par worth of
$900,000, that are dated January 1, 2014, are offered at 106 plus accrued
curiosity. They’re coupon bonds, bear curiosity at 12% (payable yearly at
January 1), and mature January 1, 2024. (Use curiosity expense account for
accrued curiosity.) Adjusting entries are made to document the accrued curiosity on
the bonds, and the amortiza- tion of the correct quantity of premium. (Use
straight-line amortization.) Curiosity on the bonds is paid. Bonds with par
worth of $360,000 are known as at 102 plus accrued curiosity, and redeemed. (Bond
premium is to be amortized solely on the finish of every 12 months.) Adjusting entries are
made to document the accrued curiosity on the bonds, and the correct quantity of
premium amortized.
(Spherical to 2 decimal locations.)
Put together journal entries for the
transactions above.
P14-7 (Entries for Life Cycle of
Bonds) On April 1, 2014, Seminole Firm offered 15,000 of its 11%, 15-year,
$1,000 face worth bonds at 97. Curiosity cost dates are April 1 and October
1, and the corporate makes use of the straight-line methodology of bond low cost amortization.
On March 1, 2015, Seminole took benefit of favorable costs of its inventory to
extinguish 6,000 of the bonds by issuing 200,000 shares of its $10 par worth
frequent inventory. Presently, the accrued curiosity was paid in money. The
companyâs inventory was promoting for $31 per share on March 1, 2015.
Directions
Put together the journal entries wanted on
the books of Seminole Firm to document the next.
(a) April 1, 2014: issuance of the bonds.
(b) October 1, 2014: cost of semiannual curiosity.
(c) December 31, 2014: accrual of curiosity expense.
(d) March 1, 2015:
extinguishment of 6,000 bonds. (No reversing entries made.)
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