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chapter10probsetc

# chapter10probsetc - PROBLEM SET C PROBLEM 10-1C Round...

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PROBLEM SET C PROBLEM 10-1C Round dollar amounts to the nearest whole dollar. Assume no reversing entries are used. Belinski Bonding issues bonds on January 1, 2005, that pay interest semiannually on June 30 and December 31. The bonds have a \$120,000 par value, the annual contract rate is 12%, and the bonds mature in 15 years. Required For each of the following three separate situations, (a) determine the bonds’ issue price and (b) show the journal entry to record their issuance. 1. Market rate at the date of issuance is 10%. 2. Market rate at the date of issuance is 12%. 3. Market rate at the date of issuance is 14%. PROBLEM 10-2C Stella Co. issues \$1,000,000 of 8%, 10-year bonds dated January 1, 2005, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of \$914,800. Required 1. Prepare the journal entry to record the bonds’ issuance. 2. For each semiannual period, compute (a) the cash payment, (b) the straight-line discount amortization, and (c) the bond interest expense. 3. Determine the total bond interest expense that will be recognized over the life of these bonds. 4. Prepare the first two years of an amortization table like Exhibit 14.7 using the straight-line method. 5. Prepare the journal entries to record the first two interest payments. 6. Assume that the bonds are issued at a price of \$1,085,200. Repeat parts 1 through 5. PROBLEM 10-3C Serena issues 9%, five-year bonds dated January 1, 2004, with a par value of \$300,000. The bonds pay interest on June 30 and December 31 and are issued at a price of \$312,177. The market rate is 8% on the issue date. Required 1. Calculate the total bond interest expense over the bonds’ life. 2. Prepare a straight-line amortization table like Exhibit 14.11 for the bonds’ life.

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