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ACC - Entries for Bonds Payable and Installment

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Question;Entries for Bonds Payable and Installment Note TransactionsThe following transactions were completed by Hobson Inc., whose fiscal year is the calendar year:2012 July. 1. Issued $8,890,000 of five-year, 11% callable bonds dated July 1, 2012, at a market (effective) rate of 13%, receiving cash of $8,250,911. Interest is payable semiannually on December 31 and June 30.Oct. 1. Borrowed $120,000 as a 10-year, 7% installment note from Marble Bank. The note requires annual payments of $17,085, with the first payment occurring on September 30, 2013.Dec. 31. Accrued $2,100 of interest on the installment note. The interest is payable on the date of the next installment note payment.Dec. 31. Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry.Dec. 31. Recorded bond discount amortization of $63,909, which was determined using the straight-line method.Dec. 31. Closed the interest expense account.2013 June. 30. Paid the semiannual interest on the bonds.Sept. 30. Paid the annual payment on the note, which consisted of interest of $8,400 and principal of $8,685.Dec. 31. Accrued $1,948 of interest on the installment note. The interest is payable on the date of the next installment note payment.Dec. 31. Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry.Dec. 31. Recorded bond discount amortization of $127,818, which was determined using the straight-line method.Dec. 31. Closed the interest expense account.2014 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $383,453 after payment of interest and amortization of discount have been recorded. (Record the redemption only.)Sept. 30. Paid the second annual payment on the note, which consisted of interest of $7,792 and principal of $9,293.Required:1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank. When required, round your answers to the nearest dollar.

 

Paper#41401 | Written in 18-Jul-2015

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