P8-3 -...

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Sierra Vaults Corporation produces and sells burial vaults. On July 1, 2010, Sierra Vaults  Corporation issued $18,000,000 of 10-year, 6% bonds at par. Interest on the bonds is payable  semiannually on December 31 and June 30. The fiscal year of the company is the calendar  year. Instructions 1. Illustrate the effects of the issuance of the bonds on July 1, 2010, on the accounts and  financial statements. On accounting records: July 1, 2010 Cash a/c Dr $18,000,000 Bonds Payable a/c $18,000,000 On Financial statements: Income statement No effect Balance sheet: Assets increase by $18,000,000 Long-term liabilities increase by $18,000,000 Statement of retained earnings = No effect Statement of cash flows = Cash flow from financing activities will increase. 2. Illustrate the effects of the first semiannual interest payment on December 31, 2010, on the  accounts and financial statements. On Accounting records:
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This note was uploaded on 04/11/2011 for the course ACC 305 taught by Professor Allison during the Spring '11 term at Western Intl..

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P8-3 -...

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