Pls hlep me Instructions: Prepare the appropriate journal entries for each of th
ID: 2491381 • Letter: P
Question
Pls hlep me
Instructions: Prepare the appropriate journal entries for each of the following transactions in 2014. You may omit journal entry explanations. Show computations.
1. On January 1, 2014, Satterfield Fuel Cells issued bonds with a face value of $800,000. The bonds carry a stated interest of 6% payable each January 1. Prepare the journal entry for the issuance assuming the bonds are issued at 102.
2. Acree Analysts purchased $300,000 of its bonds on June 30, 2014, at 101 and immediately retired them. The carrying value of the bonds on the retirement date was $294,000. The bonds pay semiannual interest and the interest payment due on June 30, 2014 has been made and recorded. Prepare the journal entry for the retirement of the bond.
3. On April 1, Way Company borrows $30,000 from Wells Fargo Bank by signing a 5-month, 5%, interest-bearing note.
(a) Prepare the entry for Way on April 1 when the note was issued.
(b) Prepare any adjusting entries necessary on June 30 for Way in order to prepare the semiannual financial statements.
(c) Prepare the entry to record payment of the note by Way at maturity
Explanation / Answer
Journal Entries:
1.
Calculation: Bond Face Value = 800,000 issued at 102 = 800,000 x 102% = $816,000
2.
Working: Retirement Price = 300,000 x 101% = $303,000
Face Value = 300,000 Less: Carrying Value = $294,000 = $6,000 Unamortized Discount
3.
Working: Annual Interest = 30,000 x 5% = 1,500
For 5 months = 1,500 / 12 x 5 = 625
For 3 months from April to June = 625 / 5 x 3 = 375
Date Account Title Debit Credit Jan1, 2014 Cash 816,000 6% Bonds Payable 800,000 Premium on issue of Bonds 16,000