ACCOUNTING-On May 1, 2014, Herron Corp. issued $507,600, 10%, 5-year bonds at face value

QUESTION

Problem 15-1A
On May 1, 2014, Herron Corp. issued $507,600, 10%,
5-year bonds at face value. The bonds were dated May 1, 2014, and pay
interest semiannually on May 1 and November 1. Financial statements are
prepared annually on December 31.
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Your answer is correct.

Prepare
the journal entry to record the issuance of the bonds.(Credit
account titles are automatically indented when amount is entered. Do not
indent manually.)

Date

Account Titles
and Explanation

Debit

Credit

May 1, 2014

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>Cash

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>507600

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>Bonds Payable

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>507600

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Prepare
the adjusting entry to record the accrual of interest on December 31,
2014.(Credit account titles are automatically indented when amount
is entered. Do not indent manually.)

Date

Account Titles
and Explanation

Debit

Credit

Dec. 31, 2014

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>Interest Expense

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>25380

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>Interest Payable

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with correct answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>25380

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Show
the balance sheet presentation on December 31, 2014.(For
Bonds Payable, Notes Payable and Mortgage payable enter the account name
only and do not provide any additional descriptive information e.g. due
2017.)

Herron Corp.
Balance Sheet
December 31, 2014

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>res_EAT_1358400021823_0_020787848308588264_027

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>Interest Payable

$.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>res_EAT_1358400021823_0_020787848308588264_052

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>Bonds Payable

$.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>507600

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Prepare
the journal entry to record payment of interest on May 1, 2015, assuming
no accrual of interest from January 1, 2015, to May 1, 2015.(Credit
account titles are automatically indented when amount is entered. Do not
indent manually.)

Date

Account Titles
and Explanation

Debit

Credit

May 1, 2015

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>Interest Payable

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>Interest Expense

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer now contains modified data”>Cash

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

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Prepare
the journal entry to record payment of interest on November 1, 2015.(Credit
account titles are automatically indented when amount is entered. Do not
indent manually.)

Date

Account Titles
and Explanation

Debit

Credit

Nov. 1, 2015

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

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Assume
that on November 1, 2015, Herron calls the bonds at 103. Record the
redemption of the bonds.(Credit account titles
are automatically indented when amount is entered. Do not indent
manually.)

Date

Account Titles
and Explanation

Debit

Credit

Nov. 1, 2015

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: entry field with incorrect answer”>

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Problem 15-3A
Talkington Electronics issues a $392,100, 10%, 10-year
mortgage note on December 31, 2013. The proceeds from the note are to be
used in financing a new research laboratory. The terms of the note
provide for semiannual installment payments, exclusive of real estate
taxes and insurance, of $31,463. Payments are due June 30 and December
31.
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Prepare
an installment payments schedule for the first 2 years.(Round
answers to 0 decimal places, e.g. 15,250.)

Semiannual
Interest Period

Cash
Payment

Interest
Expense

Reduction
of Principal

Principal
Balance

Issue Date

$.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>392100

1

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2

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3

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4

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Prepare
the entries for (1) the loan and (2) the first two installment payments.(Credit
account titles are automatically indented when amount is entered. Do not
indent manually.)

Date

Account Titles
and Explanation

Debit

Credit

Dec. 31, 2013

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Cash

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>392100

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Mortgage Payable

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>392100

June 30, 2014

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Interest Expense

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Mortgage Payable

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Cash

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

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Dec. 31, 2014

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Interest Expense

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Mortgage Payable

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Cash

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

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Show
how the total mortgage liability should be reported on the balance sheet
at December 31, 2014.(For Bonds Payable,
Notes Payable and Mortgage payable enter the account name only and do not
provide any additional descriptive information e.g. due 2023.)

Talkington Electronics
Balance Sheet
December 31, 2014

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>res_EAT_1358400023648_0_19798269146785274_085

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Mortgage Payable

$.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>res_EAT_1358400023648_0_19798269146785274_110

.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>Mortgage Payable

$.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

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Problem 15-5A
On July 1, 2014, Flanagin Corporation issued
$2,045,600, 10%, 10-year bonds at $2,323,610. This price resulted in
an effective-interest rate of 8% on the bonds. Flanagin uses the effective-interest
method to amortize bond premium or discount. The bonds pay semiannual
interest July 1 and January 1.
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Prepare
the journal entry to record the issuance of the bonds on July 1, 2014.(Credit
account titles are automatically indented when amount is entered. Do not
indent manually.)

Date

Account Titles
and Explanation

Debit

Credit

July 1, 2014

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.0/msohtmlclip1/01/clip_image001.gif” alt=”Description: http://edugen.wiley.com/edugen/art2/common/pixel.gif”>

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Prepare
an amortization table through December 31, 2015 (3 interest periods), for
this bond issue.(Round answers to 0
decimal places, e.g. 15,250.)

FLANAGIN
CORPORATION
Bond Premium Amortization
Effective-Interest Method—Semiannual Interest Payments

Semiannual
Interest Periods

Interest
to Be Paid

Interest
Expense

Premium
Amortization

Unamortized
Premium

Bond
Carrying Value

Issue date

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