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
Prepare the September 1 entry to record the mower sale (and cost of sale) and the January 24 entry to record the warranty repairs.
|Discount on Bonds payable||240|
|Premium on Bonds payable||840|
|Semiannual cash interest payment||1,320||=24,000*11%/2|
|Dec 31||Warranty expense (620*8%)||50|
|Estimated warranty liability||50|
|jan 24||Estimated warranty liability||43|
|Repair parts inventory||43|
Get Answers For Free
Most questions answered within 1 hours.