Question

Issuing Bonds

Cyber Tech Inc. produces and distributes fiber optic cable for use by telecommunications companies. Cyber Tech Inc. issued $78,000,000 of 20-year, 6% bonds on March 1 at their face amount, with Interest payable on March 1 and September 1. The fiscal year of the company is the calendar year.

Illustrate the effects on the accounts and financial statements of recording the following selected transactions for the current year. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Round your answers to the nearest dollar.

Mar. 1. Issued the bonds for cash at their face amount.

Statement of Cash Flows	Balance Sheet						Income Statement
	Assets	=	Liabilities	+	Stockholders' Equity
		=		+
Mar. 1.							Mar. 1.
Statement of Cash Flows						Income Statement

Sept. 1. Paid the interest on the bonds.

Statement of Cash Flows	Balance Sheet						Income Statement
	Assets	=	Liabilities	+	Stockholders' Equity
		=		+
Sept. 1.							Sept. 1.
Statement of Cash Flows						Income Statement

Dec. 31. Recorded accrued interest for four months.

Statement of Cash Flows	Balance Sheet						Income Statement
	Assets	=	Liabilities	+	Stockholders' Equity
		=		+
Dec. 31.							Dec. 31.
Statement of Cash Flows						Income Statement

Answer 1

Issue bonds

	Balance sheet
Date	Assets	=	Liabilities	+	Stockholder's equity
	Cash	=	Bonds payable		Paid in capital	+	Retained earnings
Mar 1	7800000		7800000
Statement of cash flow							Income statement
Cash flow from financing activities	7800000						No effect

Interest expense

	Balance sheet
Date	Assets	=	Liabilities	+	Stockholder's equity
	Cash	=	Bonds payable		Paid in capital	+	Retained earnings
Sep 1	-234000						-234000
Statement of cash flow							Income statement
Cash flow from operating activities	-234000						interest expense -234000

Interest payable

	Balance sheet
Date	Assets	=	Liabilities	+	Stockholder's equity
	Cash	=	Interest payable		Paid in capital	+	Retained earnings
Dec 31			117000				-117000
Statement of cash flow							Income statement
No effect							Interest expense -117000