[The following information applies to the questions displayed below.] Schlitterb

Question

[The following information applies to the questions displayed below.] Schlitterbahn Waterslide Company issued 41,000, 10-year, 4 percent, $100 bonds on January 1 at face value. Interest is payable each December 31. (a) The issuance of these bonds on January 1 (b) The first interest payment on December 31. References Section Break M10-11 Recording Bonds Issued at Face Value LO 10-3] value: 4.54 points Required informatio M10-11 Part 1 Indicate the effects of the amounts for the above transactions. (Enter any decreases to account balances with a minus sign.) 1. Assets Liabilities Stockholders' Equity

Explanation / Answer

Part 1

Assets

=

Liabilities

+

Shareholder's Equity

(a)

$                    4,100,000.00

$ 4,100,000.00

NA

(b)

$                     (164,000.00)

NA

$                (164,000.00)

Note * When Interest is paid then Cash is Decreased and Expenses are increased. Increased Expenses will reduce Retained earning hence Shareholder's equity.

Part 2

Journal Entries

1-Jan

Cash

$ 4,100,000.00

       Bonds Payable

$ 4,100,000.00

(Bonds Issued at Par)

31-Dec

Interest Expense

$ 164,000.00

      Cash

$ 164,000.00

(Interest on bond Paid at the end of year)

Part 1

Assets

=

Liabilities

+

Shareholder's Equity

(a)

$                    4,100,000.00

$ 4,100,000.00

NA

(b)

$                     (164,000.00)

NA

$                (164,000.00)

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