Question

The following information is taken from Pronghorn Corp.’s balance sheet at December 31, 2016. Current liabilities...

The following information is taken from Pronghorn Corp.’s balance sheet at December 31, 2016. Current liabilities Interest payable $ 92,000 Long-term liabilities Bonds payable (7%, due January 1, 2027) $4,080,000 Less: Discount on bonds payable 40,800 4,039,200 Interest is payable annually on January 1. The bonds are callable on any annual interest date. Pronghorn uses straight-line amortization for any bond premium or discount. From December 31, 2016, the bonds will be outstanding for an additional 10 years (120 months). (a) Journalize the payment of bond interest on January 1, 2017. (b) Prepare the entry to amortize bond discount and to accrue the interest on December 31, 2017. (c) Assume on January 1, 2018, after paying interest, that Pronghorn Corp. calls bonds having a face value of $680,000. The call price is 102. Record the redemption of the bonds. (d) Prepare the adjusting entry at December 31, 2018, to amortize bond discount and to accrue interest on the remaining bonds.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Journal entry

Date General Journal Debit Credit
Jan 1 Interest payable 92000
Cash 92000
Dec 31 Interest expense 96080
Discount on bonds payable (40800/10) 4080
Interest payable 92000
Jan 1,2018 Bonds payable 680000
Loss on bond redemption 19720
Discount on bonds payable 6120
Cash (680000*1.02) 693600
Dec 31, 2018 Interest expense 241400
Discount on bonds payable 3400
Interest payable (3400000*7%) 238000

Carrying value on Jan 1,2018 = 4039200-4080 = 4043280

Carrying value of 680000 = 4043280/4080000*680000 = 673880

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Exercise 15-07 a-c The following section is taken from Sandhill Corp.’s balance sheet at December 31,...
Exercise 15-07 a-c The following section is taken from Sandhill Corp.’s balance sheet at December 31, 2019. Current liabilities        Interest payable $   113,400 Long-term liabilities        Bonds payable, 7%, due January 1, 2024 1,620,000 Bond interest is payable annually on January 1. The bonds are callable on any interest date. Your answer is partially correct. Try again. Journalize the payment of the bond interest on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)...
sShannon Company issued $1,000,000, 8%, 10-year bonds on December 31, 2016, for $960,000. Interest is payable...
sShannon Company issued $1,000,000, 8%, 10-year bonds on December 31, 2016, for $960,000. Interest is payable annually on December 31. Shannon uses the straight-line method to amortize bond premium or discount. (a) The issuance of the bonds. (b) The payment of interest and the discount amortization on December 31, 2017. (c) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Riggs Corporation has the following balance sheet information at December 31, 2016. Current liabilities $ 800,000...
Riggs Corporation has the following balance sheet information at December 31, 2016. Current liabilities $ 800,000 Convertible bonds ($1,000 par, 5%) 2,000,000 Common stock ($1 par, 300,000 shares issued 300,000 Additional paid-in capital 2,100,000 Retained earnings 3,230,000 Treasury stock (43,000 shares) (1,161,000 ) Total liabilities and shareholders’ equity $ 7,269,000 The convertible bonds were issued at par in 2014 and are convertible into Riggs’s common stock at a ratio of 15 shares of stock to 1 bond. In its December...
The balance sheet for Oriole Consulting reports the following information on July 1, 2020. Long-term liabilities...
The balance sheet for Oriole Consulting reports the following information on July 1, 2020. Long-term liabilities Bonds payable $4,500,000 Less: Discount on bonds payable 180,000 $4,320,000 Oriole decides to redeem these bonds at 104 after paying annual interest. Prepare the journal entry to record the redemption on July 1, 2020.
Waterway Corporation Balance Sheet December 31, 2016 and December 31, 2017 2016 Dr. Cr. 2017 Assets...
Waterway Corporation Balance Sheet December 31, 2016 and December 31, 2017 2016 Dr. Cr. 2017 Assets Cash $120,900 $274,350 Accounts Receivable 286,750 279,000 Inventory 185,000 185,000 Investments 114,700 80,600 Equipment 372,000 461,900 Accummulated Depreciation (137,950) (164,300) Total $941,400 $1,116,550 Liabilities and Stockholders' Equity Accounts Payable $234,050 $207,700 Bonds Payable 185,000 130,000 Common Stock 248,000 303,000 Retained Earnings 274,350 475,850 Total $941,400 -   -   $1,116,550 Additional Information: 1. Net income for 2017 $248,000 2. Investments were sold at a loss of...
The balance sheet at December 31, 2018, for Nevada Harvester Corporation includes the liabilities listed below:...
The balance sheet at December 31, 2018, for Nevada Harvester Corporation includes the liabilities listed below: a. 10% bonds with a face amount of $42 million were issued for $42 million on October 31, 2009. The bonds mature on October 31, 2029. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2019, at a redemption price of $42 million. Market conditions are such that the call is not expected to be exercised. b. Management intended...
On January 2, 2012, Blossom Corporation issued $2,200,000 of 10% bonds at 99 due December 31,...
On January 2, 2012, Blossom Corporation issued $2,200,000 of 10% bonds at 99 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method”.) The bonds are callable at 102 (i.e., at 102% of face amount), and on January 2, 2017, Blossom called $1,320,000 face amount of the...
Carla Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported...
Carla Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability. 1. On December 15, 2017, Carla declared a cash dividend of $2.60 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Carla has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury. 2. At December 31, bonds payable of $101,992,000 are outstanding. The bonds...
The assets and liabilities of Computer Service Corp. as of December 31, 2016, and revenues and...
The assets and liabilities of Computer Service Corp. as of December 31, 2016, and revenues and expenses for the year ended on that date follow: Land …………………………………………   $8,200     Equipment ……………………………………..   $35,000 Note payable …………………………..    31,000     Interest expense ……………………………        4,650 Property tax expense ………………      2,400     Interest payable ……………………………..       1,000 Rent expense …………………………..    13,000     Accounts payable …………………………..       9,000 Accounts receivable ………………..     26,500     Salary expense ……………………………….     34,000 Service revenue ………………………. 143, 000     Building ………………………………………….   125,000 Supplies ……………………………………     1,900      Cash ……………………………………………….     14,000 Utilities expense...
The current sections of Scoggin Inc.’s balance sheets at December 31, 2016 and 2017, are presented...
The current sections of Scoggin Inc.’s balance sheets at December 31, 2016 and 2017, are presented here. Scoggin’s net income for 2017 was $154,700. Depreciation expense was $23,300. 2017 2016 Current assets    Cash $102,700 $97,700    Accounts receivable 109,400 80,000    Inventory 158,200 173,000    Prepaid expenses 26,900 25,900       Total current assets $397,200 $376,600 Current liabilities    Accrued expenses payable $15,000 $9,300    Accounts payable 84,000 95,600       Total current liabilities $99,000 $104,900 Prepare the net cash provided by operating activities section of the company’s statement...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT