b McEntire Co sold 2500000 of 10 10 year bonds at 104 on January 1 2010 The

# B mcentire co sold 2500000 of 10 10 year bonds at 104

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(b) McEntire Co. sold \$2,500,000 of 10%, 10-year bonds at 104 on January 1, 2010. The bonds were dated January 1, 2010, and pay interest on July 1 and January 1. If McEntire uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2010, and December 31, 2010. Interest paid for the period from January 1 (July 1) to June 30 (December 31), 2010; \$2,500,000 * 10% * 6/12 \$125,000 Less: Premium amortization for the period from January 1, (July 1) to June 30 (December 31), 2010 [(\$2,500,000 * 1.04) - \$2,500,000] / 20 5,000 Interest expense to be recorded on July 1 (December 31,) 2010 120,000 © Cheriel Inc. issued \$600,000 of 9%, 10-year bonds on June 30, 2010, for \$562,500. This price provided a yield of 10% on the bonds. Interest is payable semiannually on Decmeber 31 and June 30. If Cheriel uses the effective interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2010. Carrying amount of bonds on June 30, 2010 \$562,500 Effective-interest rate for the period from June 30 to October 31, 2010 (10% * 4/12) X .033333 Interest expense to be recorded on October 31, 2010 \$18,750
Exercise 14-9 (Entries and Questions for Bonds Transactions) On June 30, 2010, Mackes Company issued \$5,000,000 face value of 13%, 20-year bonds at \$5,376,150, a yield of 12%. Mackes uses the effective interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Instructions: (a) Prepare the journal entries to record the following transactions. (1) The issuance of the bonds on June 30, 2010. Cash 5,376,150 Bonds Payable 5,000,000 Premium on Bonds Payable 376,150 (2) The payment of interest and the amortization of the premium on December 31, 2010. Bond Interest Expense 322,569.00 (\$5,375,150 * 12% * 6/12) Premium on Bonds Payable 2,431.00 Cash (\$5,000,000 * 13% * 6/12) 325,000 (3) The payment of interest and the amortization of the premium on June 30, 2011. Bond Interest Expense 322,423.14 [(\$5,376,150 - \$2,431.00) * 12% * 6/12] Premium on Bonds Payable 2,576.86 Cash 325,000 (4) The payment of interest and the amortizationn of the premium on December 31, 2011. Bond Interest Expense 322,268.53 [(\$5,376,150 - \$2,431.00 - \$2,576.86) * 12% * 6/12] Premium on Bonds Payable 2,731.47 Cash 325,000 (b)Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2011, balance sheet. Long-term liabilities: Bonds payable, 13% (due on June 30, 2030) \$5,000,000 Premium on Bonds Payable 368,410.67 Book value of bonds payable \$5,368,411 *(\$5,376,150 - \$5,000,000) - (\$2,431 + \$2,576.86 + 2,731.47) = \$368,410.67
© Provide the answers to the following questions (1) What amount of interest expense is reported for 2011?

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