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Principles of Accounting, Volume 1: Financial Accounting

Problem Set B

Principles of Accounting, Volume 1: Financial AccountingProblem Set B

Problem Set B

PB 1.

LO 13.3Sub-Cinema Inc. borrowed $10,000 on Jan. 1 and will repay the loan with 12 equal payments made at the end of the month for 12 months. The interest rate is 12% annually. If the monthly payments are $888.49, what is the journal entry to record the cash received on Jan. 1 and the first payment made on Jan. 31?

PB 2.

LO 13.1Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date. Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was received upon issuance?

PB 3.

LO 13.2Starmount Inc. sold bonds with a $50,000 face value, 12% interest, and 10-year term at $48,000. What is the total amount of interest expense over the life of the bonds?

PB 4.

LO 13.2Irving Inc. sold bonds with a $50,000, 10% interest, and 10-year term at $52,000. What is the total amount of interest expense over the life of the bonds?

PB 5.

LO 13.3Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions.

  1. July 1, 2018: entry to record issuing the bonds
  2. June 30, 2019: entry to record payment of interest to bondholders
  3. June 30, 2019: entry to record amortization of discount
  4. June 30, 2020: entry to record payment of interest to bondholders
  5. June 30, 2020: entry to record amortization of discount
PB 6.

LO 13.3Edward Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable semiannually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions.

  1. July 1, 2018: entry to record issuing the bonds
  2. Dec. 31, 2018: entry to record payment of interest to bondholders
  3. Dec. 31, 2018: entry to record amortization of discount
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