Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, Trueman Corp. issued $700,000 of 20-year, 11% bonds for $647,337, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31. a. Prepare the journal entries for transactions described above. Note: Round your answers to the nearest whole dollar. Date Jan, 1 Cash Bond discount Bonds payable Io record issuance of bonds. Jun. 30 Interest expense Cash Account Bond premium To record first semiannual installment. 647.337 0 Dec 31 Interest expense Cash Bond premium To record second semiannual installment Cash Date Dec. 31 Bonds payable 38.500✔ 38.500 V V Account Gain to adjust bonds to fair value To record fair value ad ustment. V V Y Debit 647,337 52,663 0 38.500 0 0 v V 38.500 0 0 Credit DV Ou 700,000 b. Post the journal entries to their respective T-accounts. Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account. 0x 38,500 0x 0x 38,500 Credit 0x Bonds payable 0✔ 0 700.000 c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value. Debit 70,000 0 0x 7,000 x 0✓ Interest expense 0x 0 x 05 0✓ Bond discount 52.663 0✓ 0x 0x
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, Trueman Corp. issued $700,000 of 20-year, 11% bonds for $647,337, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31. a. Prepare the journal entries for transactions described above. Note: Round your answers to the nearest whole dollar. Date Jan, 1 Cash Bond discount Bonds payable Io record issuance of bonds. Jun. 30 Interest expense Cash Account Bond premium To record first semiannual installment. 647.337 0 Dec 31 Interest expense Cash Bond premium To record second semiannual installment Cash Date Dec. 31 Bonds payable 38.500✔ 38.500 V V Account Gain to adjust bonds to fair value To record fair value ad ustment. V V Y Debit 647,337 52,663 0 38.500 0 0 v V 38.500 0 0 Credit DV Ou 700,000 b. Post the journal entries to their respective T-accounts. Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account. 0x 38,500 0x 0x 38,500 Credit 0x Bonds payable 0✔ 0 700.000 c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value. Debit 70,000 0 0x 7,000 x 0✓ Interest expense 0x 0 x 05 0✓ Bond discount 52.663 0✓ 0x 0x
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...
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