Practice Problems: Bonds
Complete the demo problem, and self test true/false and multiple choice questions. Check your answers at the end after you finish.
Jackson Company issued USD 100,000 face value of 15 percent, 20-year junk bonds on 2010 April 30. The bonds are dated 2010 April 30, call for semiannual interest payments on April 30 and October 31, and are issued to yield 16 percent (8 percent per period).
a. Compute the amount received for the bonds.
b. Prepare an amortization schedule. Enter data in the schedule for only the first two interest periods. Use the effective interest rate method.
c. Prepare journal entries to record issuance of the bonds, the first six months' interest expense on the bonds, the adjustment needed on 2010 December 31 (assuming Jackson's accounting year ends on that date), and the second six months' interest expense on 2011 April 30.
Source: Textbook Equity, https://learn.saylor.org/pluginfile.php/41429/mod_resource/content/15/AccountingPrinciples2.pdf
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