There are three problems this week. Click the tabs at the bottom of the spreadsh
ID: 2419487 • Letter: T
Question
There are three problems this week. Click the tabs at the bottom of the spreadsheet to access each one. On 1/1/2015, Snickers Company issued 10-year bonds with a face value of $700,000 at 101. The bonds carry a stated interest rate of 8%, with interest payable semi-annually on January 1 and July 1. Snickers uses the straight-line method of amortizing bond premium or discount. (a) Prepare the journal entry to record the issuance of the bonds. (b) Prepare the journal entry to record payment of interest on July 1, 2015. (c) Prepare the adjusting entry to record the accrual of interest on December 31, 2015. (d) Prepare the balance sheet presentation for the bond on 12/31/2015. (e) Prepare the balance sheet presentation for the bond on 12/31/2016. Solutions: Date Account Debit Credit 1/1/2015 Cash 707,000 Bonds Payable 700,000 Premium on Bonds Payable 7,000 7/1/2015 Interest Expense 28,000 Note that it would also be correct to combine the two entries into one. Cash 28,000 Premium on Bonds Payable 350 Interest Expense 350 12/31/2015 Interest Expense 28,000 Note that it would also be correct to combine the two entries into one. Interest Payable 28,000 Premium on Bonds Payable 350 Interest Expense 350 Snickers Corporation Balance Sheet (Partial) 12/31/2015 Long Term Liabilities Bonds Payable 700,000 Add: Premium on Bonds Payable 6,300 706,300 Snickers Corporation Balance Sheet (Partial) 12/31/2016 Long Term Liabilities Bonds Payable 700,000 Add: Premium on Bonds Payable 5,600 705,600 There are three problems this week. Click the tabs at the bottom of the spreadsheet to access each one. On 1/1/2015, Snickers Company issued 10-year bonds with a face value of $700,000 at 101. The bonds carry a stated interest rate of 8%, with interest payable semi-annually on January 1 and July 1. Snickers uses the straight-line method of amortizing bond premium or discount. (a) Prepare the journal entry to record the issuance of the bonds. (b) Prepare the journal entry to record payment of interest on July 1, 2015. (c) Prepare the adjusting entry to record the accrual of interest on December 31, 2015. (d) Prepare the balance sheet presentation for the bond on 12/31/2015. (e) Prepare the balance sheet presentation for the bond on 12/31/2016. Solutions: Date Account Debit Credit 1/1/2015 Cash 707,000 Bonds Payable 700,000 Premium on Bonds Payable 7,000 7/1/2015 Interest Expense 28,000 Note that it would also be correct to combine the two entries into one. Cash 28,000 Premium on Bonds Payable 350 Interest Expense 350 12/31/2015 Interest Expense 28,000 Note that it would also be correct to combine the two entries into one. Interest Payable 28,000 Premium on Bonds Payable 350 Interest Expense 350 Snickers Corporation Balance Sheet (Partial) 12/31/2015 Long Term Liabilities Bonds Payable 700,000 Add: Premium on Bonds Payable 6,300 706,300 Snickers Corporation Balance Sheet (Partial) 12/31/2016 Long Term Liabilities Bonds Payable 700,000 Add: Premium on Bonds Payable 5,600 705,600Explanation / Answer
date Accounts Title and explanations Debit $ Credit $ 1/1/2015 Cash 707000 Bond Payable 700000 Premium on Bonds Payable 7000 7/1/2015 Interest Expense 27650 Premium on Bonds Payable 350 Cash 28000 12/31/2015 Interest Expense 27650 Premium on Bonds Payable 350 Interest Payable 28000 Partial Balance Sheet - 12/31/15 Bonds Payable 700000 Premium on Bonds Payable 6300 706300 Partial Balance Sheet - 12/31/16 Bonds Payable 700000 Premium on Bonds Payable 5600 705600