berol corporatin sold 20-year bonds on january 1, 2007. the face good point of the bonds was 100,000 abd the fetch a 9% stated rate of inerest, which is paid on december 31 every year. berol received 91,526 surrounded by return for the issuance of the bonds when the market rate be 10%. any premium or discount is amoritized using the effective interest method.
prepare the log entry to record the mart of the bonds on january 1, 2007, and the proper balance sheet presentation date.
prepare the publication entry to record interst expense on december 31, 2007 and the proper go together sheet presentation on this date.
explain why it was vital for berol to issue the bonds for only 91,526 to some extent than 100,000.
Answers: The market rate on these bonds is 10%, but the company is single paying interest of 9%. To account for the extra 1%, the bonds will enjoy to trade at a discount, hence they are at 91.526 rather than 100.
Sale of bond:
CR Long Term Debt 100
DR Cash 91.526
DR Bond Discount 8.47 (a contra liability)
The interest expense entry is a touch trickier
I think you own to use what is called the forceful interest method but I forgot exactly how
CR Cash
DR Interest Expense
DR Discount Amortization
CR Bond Discount
The cash will distinctly be 9% x 100,000 but not exactly sure about the rest. You might of late amortize the discount on a straight line argument.
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prepare the log entry to record the mart of the bonds on january 1, 2007, and the proper balance sheet presentation date.
prepare the publication entry to record interst expense on december 31, 2007 and the proper go together sheet presentation on this date.
explain why it was vital for berol to issue the bonds for only 91,526 to some extent than 100,000.
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Answers: The market rate on these bonds is 10%, but the company is single paying interest of 9%. To account for the extra 1%, the bonds will enjoy to trade at a discount, hence they are at 91.526 rather than 100.
Sale of bond:
CR Long Term Debt 100
DR Cash 91.526
DR Bond Discount 8.47 (a contra liability)
The interest expense entry is a touch trickier
I think you own to use what is called the forceful interest method but I forgot exactly how
CR Cash
DR Interest Expense
DR Discount Amortization
CR Bond Discount
The cash will distinctly be 9% x 100,000 but not exactly sure about the rest. You might of late amortize the discount on a straight line argument.
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