Intermediate Accounting Problems P14-5, P14-6, and P14-7
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 company’s 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.)