1.On January 1, 2012, Oakbasket Company issued bonds with a face value of $800,000. The bonds carry a stated interest of 7% payable each January 1.
Instructions: Prepare the journal entry for the issuance of the bonds:
(a)assuming the bonds are issued at 98.
(b)assuming the bonds are issued at 103.
2.Wicker Corporation purchased $400,000 of its bonds on June 30, 2012, at 102 and immediately retired them. The carrying value of the bonds on the retirement date was $359,000. The bonds pay semiannual interest and the interest payment due on June 30, 2012, has been made and recorded.
Instructions: Prepare the entry for the retirement of the bonds.
3.On March 1, the Levers Company borrows $90,000 from New National Bank by signing a 6-month, 8%, interest-bearing note.
Instructions: Prepare the necessary entries below associated with the note payable on the books of Levers Company.
(a)Prepare the entry on March 1 when the note was issued.
(b)Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made.
(c)Prepare the entry to record payment of the note at maturity.
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b.
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Mintz Company issued $300,000, 10%, 10-year bonds on January 1, 2012, at 105. Interest is payable annually. Mintz uses the straight-line method of amortization and has a calendar year end.
Instructions
Prepare all journal entries made in 2012 related to the bond issue.
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