Problem 1) Ghostbusters Corporation issues $300,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.
Problem 2) Toy Story Corporation issued $500,000 of 6% bonds on May 1, 2008. The bonds were dated January 1, 2008, and mature January 1, 2013, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Toy Story’s journal entries for the May 1 issuance, the July 1 interest payment, and the December 31 adjusting entry.
Problem 3) On January 1, 2008, Qix Corporation issued $400,000 of 7% bonds, due in 10 years. The bonds were issued for $372,816, and pay interest each July 1 and January 1. Qix uses the effective interest method. Prepare the company’s journal entries for the January 1 issuance, the July 1 interest payment, and the December 31 adjusting entry. Assume an effective interest rate of 8%.
Problem 4) On January 1,2008, Uncharted Waters Corporation retired $600,000, of bonds at 99. At the time of retirement, the unamortized premium was $15,000 and unamortized bond issue costs were $5,250. Prepare the corporation’s journal entry to record the reacquisition of the bonds.
Problem 5) The Goofy Company issued $200,000 of 10% bonds on January 1, 2008. The bonds are due January 1, 2013 with interest payable July 1 and January 1. Assume the bonds were issued at 98. Prepare the journal entries for January 1, July 1, and December 31. The company uses straight line amortization annually on December 31.