Question

On January 1, Renewable Energy issues bonds that have a $24,000 par value, mature in four years, and pay 11% interest semiannually on June 30 and December 31. 1. Prepare the journal entry for issuance assuming the bonds are issued at (a) 99 and (b) 103½. 2. How much interest does the company pay (in cash) to its bondholders every six months if the bonds are sold at par?

2. On September 1, Home Store sells a mower (that costs $320) for $620 cash with a one-year warranty that covers parts. Warranty expense is estimated at 8% of sales. On January 24 of the following year, the mower is brought in for repairs covered under the warranty requiring $43 in materials taken from the Repair Parts Inventory.

Prepare the September 1 entry to record the mower sale (and cost of sale) and the January 24 entry to record the warranty repairs.

Answer 1

Answer :-

1
		Debit	Credit
Jan 01	Cash	23,760		=24,000*0.99
	Discount on Bonds payable	240
	Bonds payable		24,000
		Debit	Credit
Jan 01	Cash	24,840		=24,000*1.035
	Bonds payable		24,000
	Premium on Bonds payable		840
2
	Semiannual cash interest payment	1,320		=24,000*11%/2

2)

Date	Account	Debit	Credit
Sep 01	Cash	620
	Sales		620
Dec 31	Warranty expense (620*8%)	50
	Estimated warranty liability		50
jan 24	Estimated warranty liability	43
	Repair parts inventory		43