Question Details

Prepare all the journal entries that Morten Corporation would make related to this bond issue 


a Ex. 1
On June 30, 2011, Wayne, Inc. sold $3,000,000 (face value) of bonds. The bonds are dated June 30, 2011, pay interest semiannually on December 31 and June 30, and will mature on June 30, 2014. The following schedule was prepared by the accountant for 2011.
 Semi-Annual	Interest to	Interest	       Bond
Interest Period	  be Paid 	Expense	Amortization	Carrying Value
					           $2,925,000
	1	$120,000	$131,625	$11,625	             1,936,625

Instructions
On the basis of the above information, answer the following questions. (Round your answer to the nearest dollar or percent.)
1.	What is the stated interest rate for this bond issue?
2.	What is the market interest rate for this bond issue?
3.	What was the selling price of the bonds as a percentage of the face value?
4.	Prepare the journal entry to record the sale of the bond issue on June 30, 2011.
5.	Prepare the journal entry to record the payment of interest and amortization on December 31, 2011.


a Ex. 2
On January 1, 2010, Morten Corporation issued $4,000,000, 9%, 5-year bonds dated January 1, 2010, at 96. The bonds pay semiannual interest on January 1 and July 1. The company uses the straight-line method of amortization and has a calendar year end.

Instructions
Prepare all the journal entries that Morten Corporation would make related to this bond issue through January 1, 2011. Be sure to indicate the date on which the entries would be made.




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