Bond Transactions Brand Company issued $1,000,000 face value, eight-year, 12% bo
ID: 2568624 • Letter: B
Question
Bond Transactions
Brand Company issued $1,000,000 face value, eight-year, 12% bonds on April 1, 2017, when the market rate of interest was 12%. Interest payments are due every October 1 and April 1. Brand uses a calendar year-end.
Required:
1. Identify and analyze the effect of the issuance of the bonds on April 1, 2017.
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
2. Identify and analyze the effect of the interest payment on October 1, 2017.
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
3. On December 31, Brand should
4. Determine the total cash inflows and outflows that occurred on the bonds over the eight-year life.
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Activity Accounts Statement(s)Explanation / Answer
ans 1 Activity Financing activity Accounts Cash account and Bonds payable account Statement(s) Balance Sheet Balance Sheet Income Statement Stockholders' arrow1.jpg Net Assets = Liabilities + Equity Revenues – Expenses = Income 1000000 1000000 0 0 0 0 2. Identify and analyze the effect of the interest payment on October 1, 2017. Activity Operating Accounts Interest expense and cash Statement(s) Incoem statement and Balnce sheet Balance Sheet Income Statement Stockholders' arrow1.jpg Net Assets = Liabilities + Equity Revenues – Expenses = Income -60000 0 -60000 0 60000 -60000 3. On December 31, Brand should Accrue Interest expenses Interest expenses 30000 Interest payable (1000000*12%*3/12) 30000 4. Determine the total cash inflows and outflows that occurred on the bonds over the eight-year life. Total cash inflows 1000000 Total cash outflows 1960000 1000000+(1000000*12%*8)