Ch 10 HW C D ezto.mheducation.com/hm.tpx Ch 10 HW Question 6 (of 6. 1.50 points
ID: 2576059 • Letter: C
Question
Ch 10 HW C D ezto.mheducation.com/hm.tpx Ch 10 HW Question 6 (of 6. 1.50 points Southwest Corporation issued bonds with the following details ace value: $510,000 Interest 10 percent per year payable each December 31 Terms: Bonds dated January 1. 2015, due five years from that date The annual accounting period ends December 31. The bonds were issued at 103 on January 1, 2015, when the market interest rate was 9 percent Assume the company uses straight-line amortization and adjusts for any rounding errors when recording interest expense in the final year Required 1. Compute the cash received from the bond issuance in dollar. TIP The issue price typically is quoted at a percentage of face value Price $ 525.300 Prepare the journal entry to record the issuance of the bonds and the payment of interest on December 31, 2015 and 2016. (If no entry is required for a transaction/event, select No Journal Entry Required" in the first account field.) 2. & 3.Explanation / Answer
a Bond price 525300 b Face value 510000 c=a-b Premium 15300 d=c/5 Premium amortisation per year 3060 Account Debit Credit Cash 525300 Bonds payable 510000 Premium on bonds payable 15300 [Entry to record issuance of bonds] Interest expense 47940 Interest payable 51000 Premium on bonds payable 3060 [Interest expense entry for 2015] Interest expense 47940 [51000-3060] Interest payable 51000 [510000*10%] Premium on bonds payable 3060 [Interest expense entry for 2016]