4.75% Notes due 2024
For this problem, assume the bonds were originally dated 7/1/17 and are due 7/1/2024. Interest payment dates are 1/1 and 7/1. ROUND ALL ANSWERS TO THE NEAREST DOLLAR! Assume that $650,000 of these bonds are sold for 93.375 on 7/1/17, to yield 5.5%.
(a) Prepare the entry to record the sale on 7/1/17:
(b) Prepare the entry required at 12/31/17:
(c) What is the 12/31/17 carrying value?
(d) What is the effect on the financial statements if the 12/31/17 adjusting entry is omitted?
(e) How much interest expense does the company report for 2017? For 2018?
(f) How much cash interest do the bondholders receive in 2017? In 2018?
(g) Prepare the entry required on 1/1/18:
(h) Prepare the entry to record the next semi-annual interest payment (and amortization), on 7/1/18:
(i) What is the effect on the financial statements of making the entry on 7/1/18?
(j) Name two liabilities (account names and amounts) that will appear on the balance sheet related to these bonds on 12/31/18: