Questions -
Q1. On January 1, 2014, Peter Co. issued 6% bonds with a face value of $450,000 when the market interest rate was 4%.
The bonds are due in seven years and interest is payable every June 30 and December 31. The effective interest method is used to amortize any bond premium or discount.
Required: Calculate the selling price of the bonds and indicate the associated accounts and dollar amounts to be reported on the Income Statement for the year ended December 31, 2015, and on the December 31, 2015, Balance Sheet. Round all amounts to the nearest dollar.
Q2. On January 1, 2014, Piper Co. issued 7% bonds with a face value of $700,000 for $671,612 when the market rate of interest was 8%. Interest is payable on June 30 and December 31, and the effective interest method is used to amortize the bond discount. The December 31, 2016, balance sheet of Piper Co. included the following items:
Bonds payable, due December 31, 2018 $700,000
Unamortized discount on bonds payable 12,704
On April 1, 2017, Piper retired all of the bonds at 96 plus accrued interest.
Required: Prepare the necessary journal entries for the April 1, 2017, bond retirement.