3). Entries and Questions for Bond Transactions – On June 30, 2012, Mackes Company issued ,000,000 face value of 13%, 20-year bonds at $5,376,150, a yield of 12%. Mackes uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30, and December 31.
a) Prepare the journal entries to record the following transactions:
1) The issuance of the bonds on June 30, 2012.
2) The payment of interest and the amortization of the premium on December 31, 2012.
3) The payment of interest and the amortization of the premium on June 30, 2013.
4) The payment of interest and the amortization of the premium on December 31, 2013.
b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2013, balance sheet.
c) Provide the answers to the following questions.
1) What amount of interest expense is reported for 2013?
2) Will the bond interest expense reported in 2013 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used?
3) Determine the total cost of borrowing over the life of the bond.
4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest expense if the straight-line method of amortization were used?
4). Entries for Zero-Interest Bearing Notes – On January 1, 2013, McLean Company makes the two following acquisitions.
a) Purchases land having a fair market value of $300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $505,518.
b) Purchases equipment by issuing a 6%, 8-year promissory note having a maturity value of $400,000 (interest payable annually).
The company has to pay 11% interest for funds from its bank.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more