ch14 - SOLUTIONS TO B EXERCISES E14-1B(1520 minutes(a(b...

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SOLUTIONS TO B EXERCISES E14-1B (15–20 minutes) (a) Debenture bonds—Classify as long-term liability on balance sheet. (b) Premium on bonds payable—Classify as adjunct account to Bonds Payable on balance sheet. (c) Income bonds payable—Classify as long-term liability on balance sheet. (d) Treasury bonds—Classify as contra account to bonds payable on balance sheet. (e) Notes payable—Classify as long-term liability on balance sheet. (f) Discount on Bonds Payable—Classify as contra account to bonds payable on balance sheet. (g) Unamortized Bond Issue Costs—Classify as “Other assets” on balance sheet. (h) Mortgage payable—Classify one-third as current liability and the remainder as long-term liability on balance sheet. (i) Gain on repurchase of debt—Classify as part of other gains and losses on the income statement. (j) Interest expense (credit balance)—Reclassify to interest payable on balance sheet. 14-1
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E14-2B (15–20 minutes) 1. Delgado Company: (a) 1/1/07 Cash. ................................................... ............................................................. 500,000 Bonds Payable. ........................ 500,000 (b) 7/1/07 Bond Interest Expense. .................... 10,000 ($500,000 X 8% X 3/12) Cash. .......................................... 10,000 (c) 12/31/07 Bond Interest Expense. .................... 10,000 Interest Payable. ....................... 10,000 2. Kumiko Company: (a) 6/1/07 Cash. ................................................... ............................................................. 208,333 Bonds Payable. ........................ 200,000 Bond Interest Expense. ........... 8,333 ($200,000 X 10% X 5/12) (b) 7/1/07 Bond Interest Expense. .................... 10,000 Cash. .......................................... 10,000 ($200,000 X 10% X 6/12) (c) 12/31/07 Bond Interest Expense. .................... 10,000 Interest Payable. ....................... 10,000 Note : Some students may credit Interest Payable on 6/1/07. In that case, the entry on 7/1/07 will have a debit to Interest Payable for $8,333 and a debit to Bond Interest Expense for $1,667. 14-2
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E14-3B (15–20 minutes) (a) 1/1/07 Cash ($400,000 X 102%). .......................... 408,000 Bonds Payable. ............................... 400,000 Premium on Bonds Payable. ......................................... 8,000 (b) 7/1/07 Bond Interest Expense. ........................... 15,800 Premium on Bonds Payable. ................... 200 ($8,000 ÷ 40) Cash. ................................................. 16,000 ($400,000 X 8% X 6/12) (c) 12/31/07 Bond Interest Expense. ........................... 15,800 Premium on Bonds Payable. ................... 200 Interest Payable. .............................. 16,000 14-3
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E14-4B (15–20 minutes) (a) 1/1/07 Cash. .......................................................... .................................................................... 492,640*
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ch14 - SOLUTIONS TO B EXERCISES E14-1B(1520 minutes(a(b...

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