ACC 363 P11-7A S. Strigel Chemical Company SOLUTION
Axia College of University of Phoenix (UoP)
Financial Accounting: Weygandt, Kieso, and Kimmel, 5th Edition
Financial Accounting II
Instructions (Round all computations to the nearest dollar.)
(a) Prepare the journal entries to record the following transactions.
(1) The issuance of the bonds on July 1, 2006.
(2) The accrual of interest and the amortization of the premium on December 31, 2006.
(3) The payment of interest and the amortization of the premium on July 1, 2007, assuming
no accrual of interest on June 30.
(4) The accrual of interest and the amortization of the premium on December 31, 2007.
(b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2007, balance sheet.
(c) Provide the answers to the following questions in letter form.
(1) What amount of interest expense is reported for 2007?
(2) Would the bond interest expense reported in 2007 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used?
(3) Determine the total cost of borrowing over the life of the bond.
(4) Would the total bond interest expense be greater than, the same as, or less than the total interest expense if the straight-line method of amortization were used?
