Chapter 14 - EXERCISE 14-2 (a) Discount on Bonds...

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EXERCISE 14-2 (a) Discount on Bonds Payable—Contra account to bonds payable on balance sheet. (b) Interest expense (credit balance)—Reclassify to interest payable on balance sheet. (c) Unamortized Bond Issue Costs—Classified as “Other Assets” on balance sheet. (d) Gain on repurchase of debt—Classify as part of other gains and losses on the income statement. (e) Mortgage payable—Classify one-third as current liability and the remainder as long-term liability on balance sheet. (f) Debenture bonds—Classify as long-term liability on balance sheet. (g) Notes payable—Classify as long-term liability on balance sheet. (h) Premium on bonds payable—Classify as adjunct account to Bonds Payable on balance sheet. (i) Treasury bonds—Classify as contra account to bonds payable on balance sheet. (j) Income bonds payable—Classify as long-term liability on balance sheet.
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EXERCISE 14-3 1. Simon Company: (a) 1/1/07 Cash . ................................................... 200,000 Bonds Payable . ......................... 200,000 (b) 7/1/07 Bond Interest Expense . ..................... 4,500 ($200,000 X 9% X 3/12) Cash . .......................................... 4,500 (c) 12/31/07 Bond Interest Expense . ..................... 4,500 Interest Payable. ........................ 4,500 2. GarFunkle Company: (a) 6/1/07 Cash . ................................................... 105,000 Bonds Payable . ......................... 100,000 Bond Interest Expense . ............ 5,000 ($100,000 X 12% X 5/12) (b) 7/1/07 Bond Interest Expense . ..................... 6,000 Cash . .......................................... 6,000 ($100,000 X 12% X 6/12) (c) 12/31/07 Bond Interest Expense . ..................... 6,000 Interest Payable. ........................ 6,000 Note to instructor: Some students may credit Interest Payable on 6/1/07. If they do so, the entry on 7/1/07 will have a debit to Interest Payable for $5,000 and a debit to Bond Interest Expense for $1,000.
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EXERCISE 14-4 (a) 1/1/08 Cash ($600,000 X 102%) . .......................... 612,000 Bonds Payable . ................................ 600,000 Premium on Bonds Payable . ......................................... 12,000 (b) 7/1/08 Bond Interest Expense . ............................ 29,700 Premium on Bonds Payable. .................... 300 ($12,000 ÷ 40) Cash . ................................................. 30,000 ($600,000 X 10% X 6/12) (c) 12/31/08 Bond Interest Expense . ............................ 29,700 Premium on Bonds Payable. .................... 300 Interest Payable . .............................. 30,000 EXERCISE 14-5 (a) 1/1/08 Cash ($600,000 X 102%). ........................... 612,000 Bonds Payable . ................................ 600,000 Premium on Bonds Payable. ........... 12,000 (b) 7/1/08 Bond Interest Expense. ............................. 29,898 ($612,000 X 9.7705% X 1/2) Premium on Bonds Payable. .................... 102 Cash . ................................................. 30,000 ($600,000 X 10% X 6/12)
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This note was uploaded on 06/05/2010 for the course LO 78778 taught by Professor Losss during the Spring '10 term at Aberystwyth University.

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Chapter 14 - EXERCISE 14-2 (a) Discount on Bonds...

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