AC 302 CHAPTER 14 PROBLEM QUESTION 2

AC 302 CHAPTER 14 PROBLEM QUESTION 2
Name			Date		
Instructor			Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
P14-2 (Issuance and Retirement of Bonds) Venezuela Co. is building a new hockey arena at a						
cost of	$2,500,000 	. It received a downpayment of			$500,000 	from local 
businesses to support the project, and now needs to borrow					$2,000,000 	 to complete 
the project. It therefore decides to issue			$2,000,000 	of	10.50%	10 
-year bonds. These bonds were issued on January 1, 2011, and pay interest annually on each 						
January 1. The bonds yield		10.00%	. Venezuela paid		$50,000 	in bond issue 
costs related to the bond sale.						
						
"Note: Use of tables or financial calculators may result is slightly different values due to rounding and
         significant digits."						
						
						
Instructions:						
"(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs
     incurred on January 1, 2011."						
						
						
Jan 1, 11	"Present value of the principal = $2,000,000 × 0.38554 =
            (PV of $1 for 10 periods at 10%) = $578,310"					
						
						
Present value of principal formula =				Formula		
						
	"Present value of the interest = $210,000 × 6.14457 =
              (PV of a $1 anuity for 10 periods at  10%) = $967,770"					
						
						
Present value of interest formula =				Formula		
						
Present selling value of the bonds =				Formula		
						
Jan 1, 11	Account title				Formula	
	Account title				Amount	
	Account title					Amount
	Account title					Formula
						
"(b) Prepare a bond amortization schedule up to and including January 1, 2015, using the effective
     interest method."						
						
						
	Date	"Interest
Paid"	"Interest
Expense"	"Premium
Amortization"	"Bond
Carrying
Value"	
	Jan 1, 11				Formula	
	Jan 1, 12	Formula	Formula	Formula	Formula	
	Jan 1, 13	Formula	Formula	Formula	Formula	
	Jan 1, 14	Formula	Formula	Formula	Formula	
	Jan 1, 15	Formula	Formula	Formula	Formula	
						
(c) Assume that on July 1, 2014, Venzuela Co. retires half of the bonds at a cost of						$1,065,000 
plus accrued interest. Prepare the journal entry to record this retirement.						
						
Hint: Resolve value of unamortized bond issue costs for the bonds being retired.						
	Unamortized bond issue costs					Amount
	Years of bond issue					Number
	Unamortized bond issue costs per year					Formula
	Unamortized bond issue costs per six months					Formula
	Six month periods to July 1, 2014					Number
	Unamortized bond issue costs to July 1, 2014					Formula
	Remaining unamortorized bond issue costs as of July 1, 2014					Formula
	Bonds retired as a percentage of bonds issued					Percenage
	Value of remaining unamortized bond issue costs to retired bonds					Formula
						
Hint: Resolve carrying value of the bonds being retired.						
	Date	"Interest
Paid"	"Interest
Expense"	"Premium
Amortization"	"Bond
Carrying
Value"	
	Jan 1, 11				Formula	
	Jan 1, 12	Formula	Formula	Formula	Formula	
	Jan 1, 13	Formula	Formula	Formula	Formula	
	Jan 1, 14	Formula	Formula	Formula	Formula	
	Percentage of bonds to be retired in the year				Percentage	
	Carrying value on Jan 1, 2014, of the bonds to be retired				Formula	
	Interest on bonds to be retired as of July 1, 2014					
	Jul 1, 14	Formula	Formula	Formula	Formula	
						
	Reacquisition price				Amount	
	Carrying value as of July 1, 2014				Amount	
					Formula	
	Unamortized bond issue costs				Formula	
	Loss				Formula	
						
	Entry for accrued interest					
	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
	Entry for reacquisition					
	Account Title				Amount	
	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
						
	Enter text as appropriate.