Question

Houston Company authorized a $1,000,000, 10-year, 9% bond issue dated July 1, 2017, with semi-annual interest...

Houston Company authorized a $1,000,000, 10-year, 9% bond issue dated July 1, 2017, with semi-annual interest to be paid each December 31 and June 30. On July 1, 2017, the market rate of interest bonds 7.5% and Houston Company has a December 31 year-end.

- What is the journal entry to record the sale of the bonds?

- What is the required journal entry on December 31, 2017 to record amortization (use the effective interest method.) No adjusting journal entries were made during the year.

- What is amount of Houston’s bond liability as of December 31, 2020?

Homework Answers

Answer #1

Bond issue price = Present value of interest at 3.75%, 20 years + Present value of maturity amount at 3.75%, 20 years

= 1000000*9%*6/12*13.896+1000000*0.479

= $1104320

Date Accounts Debit Credit
July 1, 2017 Cash $1104320
Premium on Bonds payable 104320
Bonds payable 1000000
December 31, 2017 Interest expense (1104320*7.5%*6/12) 41412
Premium on Bonds payable 3588
Cash (1000000*9%*6/12) 45000

bond liability as of December 31, 2020 = 1000000+3588 = $1003588

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Lauren Corporation authorized a $2,000,000, 10-year, 8% bond issue dated January 1, 2018, with semi-interest to...
Lauren Corporation authorized a $2,000,000, 10-year, 8% bond issue dated January 1, 2018, with semi-interest to be paid each December 3 On January 1, 2018, the bonds were issued for $2,294,000 to yield a market interest rate of 6%. Required (10 points): Were the bonds sold at par, at a discount, or at a premium? Prepare the entry to record the issuance of the bonds. Prepare the entry to record the interest payment on December 31, 2018, assuming the effective-interest...
Ellis issues $250,000, 6.5%, 5-year bonds dated January 1, 2017. The bonds pay interest semi-annually on...
Ellis issues $250,000, 6.5%, 5-year bonds dated January 1, 2017. The bonds pay interest semi-annually on June 30 and December 31. The bonds were issued at $255,333. 1. Record the journal entry to issue the bonds on January 1, 2017. 2. a. Record the journal entry to pay the semi-annual interest payment and amortize the premium on June 30, 2017. b. Record the journal entry to pay the semi-annual interest payment and amortize the premium on Dec. 31, 2017. 3....
Vaughn Ltd. issued a $135,000, 3-year, zero-interest bond dated January 1, 2017. The market interest rate...
Vaughn Ltd. issued a $135,000, 3-year, zero-interest bond dated January 1, 2017. The market interest rate for similar bonds was 8.25%. Assume the company used the effective interest method of amortization. 1. Prepare the journal entry for the issue of the bond. 2. Prepare a schedule of bond discount/premium amortization. (Round answers to 0 decimal places) 3. Prepare the journal entry at December 31, 2017, assuming the company’s year-end was December 31.
On January 1, 2016, Knorr Corporation issued $1,000,000 of 9%, 5-year bonds dated January 1, 2016....
On January 1, 2016, Knorr Corporation issued $1,000,000 of 9%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 10%. Bond issue costs associated with the bonds totaled $18,000. Required: Prepare the journal entries to record the following: January 1, 2016 Sold the bonds at an effective rate of 10% December 31, 2016 First interest payment using the effective interest method December 31, 2016 Amortization of bond issue costs...
Champs Ltd. is authorized to issue $3,500,000 of 4?%, 10?-year bonds payable. On December? 31, 2016?,...
Champs Ltd. is authorized to issue $3,500,000 of 4?%, 10?-year bonds payable. On December? 31, 2016?, when the market interest rate is 5?%, the company issues $2,800,000 of the bonds. Champs Ltd. amortizes bond discount by the? effective-interest method. The semiannual interest dates are June 30 and December 31. Requirements 1. Use the PV function in Excel to calculate the issue price of the bonds. 2. Prepare a bond amortization table for the first year of the bond 3. Record...
Stottard Company issued 675,000 of 10 % , 10 year bonds on June 1 , 2017...
Stottard Company issued 675,000 of 10 % , 10 year bonds on June 1 , 2017 , at 103. The bonds were dated June 1, and interest is payable on June 1 and December 1 of each year. Required: 1. Record the issuance of the bonds on June 1, 2017. 2. Record the interest payment on December 1, 2017. Stottard uses the straight-line method of amortization. 3. Record the interest accrual on December 31, 2017, including amortization. 4. Record the...
7.) Gareon Conley Company issued $3,000,000 of 10-year, 6% annual interest, bonds payable on March 1,...
7.) Gareon Conley Company issued $3,000,000 of 10-year, 6% annual interest, bonds payable on March 1, 2018. The bonds are dated January 1, 2018, with interest payable semi-annually every July 1 and January 1. Conley Company maintains their accounting records on a fiscal year ending July 31. The market rate of interest on similar debt instruments was also 6% so the bonds were sold at face (par) value. The journal entry to record the first interest payment on July 1,...
On 1 July 20X0, Sandalwood Company issued $10 million, 5 year, 5% bonds at 95, with...
On 1 July 20X0, Sandalwood Company issued $10 million, 5 year, 5% bonds at 95, with interest payable on 31 December and 30 June. The company policy is to use the straight-line method issued to amortise the bond discount or bond premium. Required: Part A: Prepare the journal entry to record the sale of these bonds at the issue date - [3 marks] Part B: Prepare the journal entry to record the interest expense and bond amortisation on 31 December...
Problem 2 Smith Corporation received approval to issue $1,000,000 of 9%, 20 year Bonds.  The Bonds have...
Problem 2 Smith Corporation received approval to issue $1,000,000 of 9%, 20 year Bonds.  The Bonds have interest payment dates of September 30th and March 31st.  The Bonds are issued at a price of 100 plus accrued interest on May 31st, 2017. Prepare the journal entries that will be needed on (1) May 31,2017 to record the issuance of the bonds, (2) September 30th2017 to record the first payment of interest, and December 31, 2017 to record the adjusting entry necessary related...
On January 1, 2016, Knorr Corporation issued $1,100,000 of 9%, 5-year bonds dated January 1, 2016....
On January 1, 2016, Knorr Corporation issued $1,100,000 of 9%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 10%. Bond issue costs associated with the bonds totaled $20,058.17. Do not round answers. Required: Prepare the journal entries to record the following: January 1, 2016 Sold the bonds at an effective rate of 10% December 31, 2016 First interest payment using the effective interest method December 31, 2016 Amortization...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT