CLASSROOM EXERCISES ON BONDS PAYABLE

CLASSROOM EXERCISES ON BONDS PAYABLE - CLASSROOM EXERCISES...

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CLASSROOM EXERCISES ON BONDS PAYABLE 1. Issuance at face value and bond retirement on maturity date The Colson Company issued P1,500,000 of 10% bonds on January 1, 2016. The bonds are due January 1, 2021, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson’s journal entries for (a) the January issuance, (b) the July 1 interest payment, (c) the December 31 adjusting entry and (d) the January 1, 2021 payment/retirement of bonds. 2. Issuance of bonds – discount (on and between interest payment dates) On January 1, 2016, Colson Company issues a three-year 8% P1,500,000 face value bonds at a price that will yield a 10% effective interest rate. Interest is payable semi-annually on June 30 and December 31. Required: (a) Prepare all pertinent entries. (b) How much is the current portion of the bonds payable on December 31, 2016? (c) Assuming that the bonds were issued on February 1, 2016, prepare the entries on February 1 and June 30, 2016 and compute for the total interest expense for the year 2016. 3. Issuance of bonds – premium (on and between interest payment dates) On January 1, 2016, Colson Company issues a three-year 12% P1,500,000 face value bonds at a price that will yield a 10% effective interest rate. The annual interest is payable every December 31. (a) Prepare all pertinent entries. (b) Assuming that the bonds were issued on March 1, 2016, prepare the entries on March 1 and December 31, 2016 and compute for the total interest expense for the year 2016.
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