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Ch 14 and CH15 Questions.docx - Ch 14 and CH15 Questions:...

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Ch 14 and CH15 Questions:E14.4E14.4(LO2)(Entries for Bond Transactions—Effective Interest)Foreman Inc. issued $800,000 of 10%, 20-year bonds onJanuary 1, 2020, at 102. Interest is payable semi-annually on July 1 and January 1. Foreman Inc. uses the effective interestmethod of amortization for any bond premium or discount. Assume an effective yield of 9.75%. (With a market rate of 9.75%, theissue price would be slightly higher. For simplicity, ignore this.)InstructionsPrepare the journal entries to record the following (round to the nearest dollar):1.The issuance of the bonds2.The payment of interest and the related amortization on July 1, 20203.The accrual of interest and the related amortization on December 31, 2020
E14.7E14.7(LO2)(Imputation of Interest)Two independent situations follow.1.On January 1, 2020, Spartan Inc. bought land that had an assessed value of $390,000 at the time of purchase. A$600,000, non–interest-bearing note due on January 1, 2023, was given in exchange. There was no establishedexchange price for the land, and no ready market value for the note. The interest rate that is normally charged on a noteof this type is 12%.-1
2.On January 1, 2020, Geimer Furniture Ltd. borrowed $4 million (face value) from Aurora Inc., a major customer,through a non–interest-bearing note due in four years. Because the note was non–interest-bearing, Geimer Furniture

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Interest, Dividend, 1966, 1981, Generally Accepted Accounting Principles, 1992

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