ACC 205 P7 Khan Corporation has $20,000,000 of 10.5 percent, 20 year bonds dated June 1, with interest
payment dates of May 31 and November 30
Financial Accounting Text Book: Principles of Accounting by Needles, Powers and Crosson
2002 Edition Chapter 16
Long Term Liabilities Problem P7 Khan Corporation has $20,000,000 of 10.5 percent, 20 year bonds dated June 1, with interest
payment dates of May 31 and November 30. The company’s fiscal year ends December 31. It uses the
effective interest method to amortize bond premiums or discounts (Round amounts to the nearest dollars). 1. Assume the bonds are issued at 103 on June 1 to yield an effective interest rate of 10.1 percent.
Prepare journal entries for June 1, November 30, and December 31.
2. Assume the bonds are issued at 97 on June 1 to yield an effective interest rate of 10.9 percent.
Prepare journal entries for June 1 and November 30 and December 31.
3. Assume the bonds are issued at face value plus accrued interest on August 1. Prepare journal entries for
August 1, November 30 and December 31.
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