Question

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 using the straight-line method December 31, 2017 Second interest payment using the effective interest method December 31, 2017 Amortization of bond issue costs using the straight-line method

Homework Answers

Answer #1

GIVEN DATA:

Knorr Corporation issued = 1,000,000

Interest = 9% and 5 years bond

December 31. The bonds were issued = 10%.

Total bonds = 18000

REQUIRED:

Prepare the journal entries ?

SOLUTION :

Annual interest = 9%

Annual market rate interest = 10%

1. calculation on annual interest bond :

interest = 100000 *9%

= 100000 *9/100

= 10000 * 9

= 90000$

2. Numbers of periods are = 5

Working note:

PVIF(2) : cumalative factor of 5 periods @10%(90000) =3.7908

present value factor of 5 period @10%(100000) = 0.6209

THERE FORE AMOUNT RECEIVED ON THE BOND IS 962072$

JOURNAL ENTRIES:

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
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...
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.
On January 1, 2016, Bishop Company issued 8% bonds dated January 1, 2016, with a face...
On January 1, 2016, Bishop Company issued 8% bonds dated January 1, 2016, with a face amount of $20.6 million. The bonds mature in 2025 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. 1. Determine the price of the bonds at January 1, 2016 2.Prepare the journal entry to record the bond issuance by Bishop on January 1, 2016 3.Prepare the journal entry to...
On January 1, 2017, Powell Corporation issued $600,000, 5%, 5-year bonds dated January 1, 2017, at...
On January 1, 2017, Powell Corporation issued $600,000, 5%, 5-year bonds dated January 1, 2017, at 95. The bonds pay annual interest on January 1. The company uses the effective interest method of amortization and has a calendar year end. The market interest rate is 6%. Prepare all the journal entries that Powell Corporation would make related to this bond issue through January 1, 2018. Be sure to indicate the date on which the entries would be made. January 1,...
On January 1, 2019, Timber Corporation issued $800,000, 6%, 5-year bonds for $735,110. The bonds were...
On January 1, 2019, Timber Corporation issued $800,000, 6%, 5-year bonds for $735,110. The bonds were sold to yield an effective-interest rate of 8%. Interest is paid annually on January 1. The company uses the effective-interest method of amortization. Instructions: (a) Prepare a bond discount amortization schedule which shows the amortization of discount for the first two interest payment dates. (Round to the nearest dollar). (b) Prepare the journal entries that Timber Corporation would make on January 1 and December...
1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a...
1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a face value of $81,000. The bonds are sold for $78,570. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Queen records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31. 2. The Marx Company issued $88,000 of 12% bonds on April 1 of...
McSteamyCompany issued bonds $293,000 of 5 year, 9 percent bonds on January 1, 2018, at 96....
McSteamyCompany issued bonds $293,000 of 5 year, 9 percent bonds on January 1, 2018, at 96. interest is payable in cash annually on December 31. The straight-line method is used for amortization. What is the carrying value of the bond on December 31, 2018?
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2016, that pay interest semiannually on...
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2016, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,036,935. Required: 1. Prepare the January 1, 2016, journal entry to record the bonds’ issuance. 2. (a) For each semiannual period, complete the table below to calculate the cash payment. 2. (b) For each semiannual period, complete the table below to calculate the straight-line discount amortization. 2. (c) For each semiannual...
On January? 31, 2016 Driftwood ?Logistics, Inc., issued five-year, 9?% bonds payable with a face value...
On January? 31, 2016 Driftwood ?Logistics, Inc., issued five-year, 9?% bonds payable with a face value of $11,000,000.The bonds were issued at 93 and pay interest on January 31 and July 31. Driftwood Logistics, Inc., amortizes bond discount by the? straight-line method. a. Record the issuance of the bond payable on January? 31, 2016. b. Record the payment of semiannual interest and amortization of bond discount on July? 31,2016. c. Record the interest accrual and discount amortization on December? 31,...
On January 1, 2016, Tonika Company issued a six-year, $10,000, 10% bond. The interest is payable...
On January 1, 2016, Tonika Company issued a six-year, $10,000, 10% bond. The interest is payable annually each December 31. The issue price was $9,577 based on an 11% effective interest rate. Tonika uses the effective-interest amortization method. The book value of the bonds as of December 31, 2016 is closest to: rev: 10_08_2016_QC_CS-64487 $9,524. $9,630. $53. $8,577.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT