Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, Trueman Corp. issued $700,000 of 20-year, 11% bonds for $647,337, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31. a. Prepare the journal entries for transactions described above. Note: Round your answers to the nearest whole dollar. Date Jan, 1 Cash Bond discount Bonds payable Io record issuance of bonds. Jun. 30 Interest expense Cash Account Bond premium To record first semiannual installment. 647.337 0 Dec 31 Interest expense Cash Bond premium To record second semiannual installment Cash Date Dec. 31 Bonds payable 38.500✔ 38.500 V V Account Gain to adjust bonds to fair value To record fair value ad ustment. V V Y Debit 647,337 52,663 0 38.500 0 0 v V 38.500 0 0 Credit DV Ou 700,000 b. Post the journal entries to their respective T-accounts. Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account. 0x 38,500 0x 0x 38,500 Credit 0x Bonds payable 0✔ 0 700.000 c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value. Debit 70,000 0 0x 7,000 x 0✓ Interest expense 0x 0 x 05 0✓ Bond discount 52.663 0✓ 0x 0x
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, Trueman Corp. issued $700,000 of 20-year, 11% bonds for $647,337, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31. a. Prepare the journal entries for transactions described above. Note: Round your answers to the nearest whole dollar. Date Jan, 1 Cash Bond discount Bonds payable Io record issuance of bonds. Jun. 30 Interest expense Cash Account Bond premium To record first semiannual installment. 647.337 0 Dec 31 Interest expense Cash Bond premium To record second semiannual installment Cash Date Dec. 31 Bonds payable 38.500✔ 38.500 V V Account Gain to adjust bonds to fair value To record fair value ad ustment. V V Y Debit 647,337 52,663 0 38.500 0 0 v V 38.500 0 0 Credit DV Ou 700,000 b. Post the journal entries to their respective T-accounts. Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account. 0x 38,500 0x 0x 38,500 Credit 0x Bonds payable 0✔ 0 700.000 c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value. Debit 70,000 0 0x 7,000 x 0✓ Interest expense 0x 0 x 05 0✓ Bond discount 52.663 0✓ 0x 0x
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...
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Transcribed Image Text:Analyzing and Reporting Financial Statement Effects of Bond Transactions
On January 1, Trueman Corp. issued $700,000 of 20-year, 11% bonds for $647,337, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.
a. Prepare the journal entries for transactions described above.
• Note: Round your answers to the nearest whole dollar.
Date
Jan, 1
Cash
Band discount
Jun. 30 Interest expense
GALL
Cash
Bonds payable
To record issuance of bonds.
Dec. 31 Interest expense
Bond premium
To record first semiannual installment.
Check
Account
Cash
Bond premium
To record second semiannual installment
647,337
0
Cash
Date
Dec. 31 Bonds payable
38.500✔
38.500 ✓
Account
Debit
647,337
52,663
0
Gain to adjust bonds to fair value
To record fair value adjustment.
38,500
0
0
V
38,500
0
0
b. Post the journal entries to their respective T-accounts.
• Note: Enter your answers, in transaction order, in the first open field of the appropriate column in each account.
Credit
Debit
70,000
0
0✔
0✔
700,000
0x
38,500✔
0x
0x
38.500
0x
c. On December 31, these bonds were listed in the bond market at a price of 101 (or 101% of par value). Prepare the journal entry for the transaction to adjust the bonds to fair value.
Bonds payable
Credit
0✔ 700,000 ✓
0✔
0✔
Interest expense
0x
0 x
0x
7,000 x
0
0✔
Bond discount
52,663
0
0x
0x
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