Question

Part A: : Entity J sold $1,000,000, five-year, 5% bonds on January 1, 2022 for $980,000....

Part A: : Entity J sold $1,000,000, five-year, 5% bonds on January 1, 2022 for $980,000. The bonds pay interest on December 31. The company uses straight-line amortization.

Instructions

Prepare all journal entries made in 2022 related to the bond issue and a partial balance sheet showing the bonds at December 31.

Answer the following questions.

a.         What amount was received for the bonds?

b.         How much interest is paid each interest period?

c.         What is the discount amortization for the first period?

d.         How much interest expense is recorded on the first interest date?

e.         What is the carrying value of the bonds after the first interest date?

Part B: On September 1, Entity K borrows $80,000 from New National Bank by signing a 6-month, 6%, interest-bearing note.

Instructions

Prepare the necessary entries below associated with the note payable on the books of Enity K Company.

(a)        Prepare the entry on September 1 when the note was issued.

(b)        Prepare any adjusting entries necessary on December 31 in order to prepare the 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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