AC 302 CHAPTER 14 QUESTIONS ANS PROBLEMS

AC 302 CHAPTER 14 QUESTIONS ANS PROBLEMS
Exercise 14 QUESTION 4
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
E14-4 (Entries for Bond Transactions—Straight-Line) Foreman Company issued 						$800,000 
of	10%	20 	-year bonds on January 1, 2013, at			102 
Interest is payable semiannually on July 1 and January 1. Foreman Company uses the straight-line method of amortization for bond premium or discount.						
						
						
Instructions:						
Prepare the journal entries to record the following.						
(a) The issuance of the bonds.						
						
Jan 1, 13	Account Title				Amount	
	Account Title					Formula
	Account Title					Formula
						
(b) The payment of interest and related amortization on July 1, 2013.						
						
Jul 1, 13	Account Title				Formula	
	Account Title				Formula	
	Account Title					Formula
						
(c) The accrual of interest and the related amortization on December 31, 2013.						
						
Dec 31, 13	Account Title				Formula	
	Account Title				Formula	
	Account Title					Formula
						

Exercise 14-5
Name:				Date:		
Instructor:				Course:		
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
Foreman Company issued		$800,000 	of	10%	20 	year bonds on
January 1, 2013 at		102 	Interest is payable semiannually on July 1 and January 1.			
Foreman Company uses the effective interest method of amortization for bond premium or discount.						
Assume an effective yield of		9.7705%				
Instructions:						
Prepare the journal entries to record the following. (Round to the nearest dollar.)						
(a) The issuance of the bonds.						
						
Jan 1, 13	Account Title				Formula	
	Account Title					Amount
	Account Title					Amount
						
(b) The payment of interest and related amortization on July 1, 2013.						
						
Jul 1, 13	Account Title				Formula	
	Account Title				Formula	
	Account Title					Formula
						
(c) The accrual of interest and the related amortization on December 31, 2013.						
						
Dec 31, 13	Account Title				Formula	
	Account Title				Formula	
	Account Title					Formula
						
	Carrying amount of bonds at July 1, 2013:					
	Text title				Formula	
	Text title				Formula	
	Text title				Formula	
						

Problem 14-2
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.					
						
						

Problem 14-5
Name:				Date:		
Instructor:				Course:		
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
"P14-5 (Comprehensive Bond Problem)
(Note: Calculations with financial calculators or tables might result in slightly different values due
          to rounding.)"						
						
						
"Instructions: (Round to the nearest dollar.)
In each of the following independent cases the company closes its books on December 31.
For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)"						
						
						
						
						
						
						
1. Sanford Co. sells		$500,000 	of	10%	bonds on March 1, 2012. The 	
bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2015. 						
The bonds yield		12%	Give the entries through December 31, 2013.			
						
Mar 1, 12	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
						
	Maturity value of bonds payable				Amount	
	Present value of $250,000 due in 7 periods at 6%				Formula	
	Present value of interest payable semiannually				Formula	
	Proceeds from sale of bonds				Formula	
	Discount on bonds payable				Formula	
						
Sep 1, 12	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
						
Dec 31, 12	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
	Note: Amortization table is semi-annual, interest rate is stated as annual value.					
						
Mar 1, 13	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
						
Sep 1, 13	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
						
Dec 31, 13	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
						
	Schedule of Bond Discount Amortization					
	Effective Interest Method					
	10% Bonds Sold to Yield 12%					
	Date	"Cash
Paid"	"Interest
Expense"	"Bond
Discount"	"Carrying
Value
of Bonds"	
	Mar 1, 12				Amount	
	Sep 1, 12	Formula	Formula	Formula	Formula	
	Mar 1, 13	Formula	Formula	Formula	Formula	
	Sep 1, 13	Formula	Formula	Formula	Formula	
	Mar 1, 14	Formula	Formula	Formula	Formula	
	Sep 1, 14	Formula	Formula	Formula	Formula	
	Mar 1, 15	Formula	Formula	Formula	Formula	
	Sep 1, 15	Formula	Formula	Formula	Formula	
						
2. Titania Co. sells		$400,000 	of	12%	bonds on June 1, 2012. The	
bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2016. The bonds						
yield	10%	On October 1, 2013, Titania buys back				$120,000 
worth of the bonds for		$126,000 	(includes accrued interest). Give the entries through			
December 31, 2014.						
Jun 1, 12	Account title				Amount	
	Account title					Amount
	Account title					Amount
						
	Maturity value of bonds payable				Amount	
	Present value of $250,000 due in 7 periods at 6%				Formula	
	Present value of interest payable semiannually				Formula	
	Proceeds from sale of bonds				Formula	
	Premium on bonds payable				Formula	
						
Dec 1, 12	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
	Note: Amortization table is semi-annual, interest rate is stated as annual value.					
						
Dec 31, 12	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
Jun 1, 13	Account Title				Amount	
	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
						
Oct 1, 13	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
Oct 1, 13	Account title				Amount	
	Account title				Amount	
	Account title					Amount
	Account title					Amount
						
	Net carrying amount of bonds redeemed - Par value				Amount	
	Unamortized premium				Amount	
					Formula	
	Reacquisition price				Amount	
	Gain on redemption				Formula	
						
Dec 1, 13	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
Dec 31, 13	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
Jun 1, 14	Account title				Amount	
	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
Dec 1, 14	Account				Amount	
	Account				Amount	
	Account					Amount
						
	Schedule of Bond Discount Amortization					
	Effective Interest Method					
	12% Bonds Sold to Yield 10%					
	Date	"Cash
Paid"	"Interest
Expense"	"Bond
Premium"	"Carrying
Value
of Bonds"	
	Jun 1, 12				Amount	
	Dec 1, 12	Formula	Formula	Formula	Formula	
	Jun 1, 13	Formula	Formula	Formula	Formula	
	Dec 1, 13	Formula	Formula	Formula	Formula	
	Jun 1, 14	Formula	Formula	Formula	Formula	
	Dec 1, 14	Formula	Formula	Formula	Formula	
	Jun 1, 15	Formula	Formula	Formula	Formula	
	Dec 1, 15	Formula	Formula	Formula	Formula	
	Jun 1, 16	Formula	Formula	Formula	Formula