E10-6 According to the accountant of Ulner Inc., its payroll
taxes for the week were as follows:
$198.40 for FICA taxes, $19.84 for federal unemployment
taxes, and $133.92 for state unemployment taxes.
Instructions
Journalize the entry to record the accrual of the payroll
taxes.
E10-8 Jim Thome has prepared the following list of statements
about bonds.
1. Bonds are a form of interest-bearing notes payable.
2. When seeking long-term financing, an advantage of issuing
bonds over issuing common
stock is that stockholder control is not affected.
3. When seeking long-term financing, an advantage of issuing
common stock over issuing
bonds is that tax savings result.
4. Secured bonds have specific assets of the issuer pledged
as collateral for the bonds.
5. Secured bonds are also known as debenture bonds.
6. Bonds that mature in installments are called term bonds.
7. A conversion feature may be added to bonds to make them
more attractive to bond buyers.
8. The rate used to determine the amount of cash interest the
borrower pays is called the stated rate.
9. Bond prices are usually quoted as a percentage of the face
value of the bond.
10. The present value of a bond is the value at which it
should sell in the marketplace.
Instructions
Identify each statement above as true or false. If false,
indicate how to correct the statement.
E10-18 Hrabik Corporation issued $600,000, 9%, 10-year bonds
on January 1, 2011, for
$562,613.This price resulted in an effective-interest rate of
10% on the bonds. Interest is payable
semiannually on July 1 and January 1. Hrabik uses the
effective-interest method to amortize
bond premium or discount.
Instructions
Prepare the journal entries to record the following. (Round
to the nearest dollar.)
(a) The issuance of the bonds.
(b) The payment of interest and the discount amortization on
July 1, 2011, assuming that interest was not accrued on June 30.
(c) The accrual of interest and the discount amortization on
December 31, 2011.
P10-3A
On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds
at face value. The
bonds were dated May 1, 2011, and pay interest semiannually
on May 1 and November 1.
Financial statements are prepared annually on December 31.
Instructions
(a) Prepare the journal entry to record the issuance of the
bonds.
(b) Prepare the adjusting entry to record the accrual of
interest on December 31, 2011.
(c) Show the balance sheet presentation on December 31, 2011.
(d) Prepare the journal entry to record payment of interest
on May 1, 2012, assuming no accrual of interest from January 1,
2012, to May 1, 2012.
(e) Prepare the journal entry to record payment of interest
on November 1, 2012.
(f) Assume that on November 1, 2012, Newby calls the bonds at
102. Record the redemption of the bonds.
P10-6A On July 1, 2011, Atwater Corporation issued $2,000,000
face value, 10%, 10-year
bonds at $2,271,813.This price resulted in an
effective-interest rate of 8% on the bonds. Atwater
uses the effective-interest method to amortize bond premium
or discount. The bonds pay semiannual
interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the
bonds on July 1, 2011.
(b) Prepare an amortization table through December 31, 2012
(3 interest periods) for this bond issue.
(c) Prepare the journal entry to record the accrual of
interest and the amortization of the premium on December 31, 2011.
(d) Prepare the journal entry to record the payment of
interest and the amortization of the premium on July 1, 2012,
assuming no accrual of interest on June 30.
(e) Prepare the journal entry to record
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