Commonwealth Company issued bonds with the following provisions (FV of $1, PV of

Question

Commonwealth Company issued bonds with the following provisions (FV of $1, PV of $1, FVA of $1, and PVA of $1): (Use the appropriate factor(s) from the tables provided.) Maturity value: $300,000 Interest: 11 percent per annum payable annually each December 31 Terms: Bonds dated January 1, 2014, due five years from that date The annual accounting period ends December 31. The bonds were sold on January 1, 2014, at a 10 percent market rate.

1. Compute the issue (sale) price of the bonds.

2. Prepare the journal entry to record the issuance of the bonds.

3. Prepare the journal entries for December 31, 2014 (use straight-line amortization).

4-a. How much interest expense would be reported on the income statement for 2014?

4-b.Show how the liability related to the bonds should be reported on the December 31, 2014, balance sheet.

1. Compute the issue (sale) price of the bonds.

2. Prepare the journal entry to record the issuance of the bonds.

3. Prepare the journal entries for December 31, 2014 (use straight-line amortization).

4-a. How much interest expense would be reported on the income statement for 2014?

4-b.Show how the liability related to the bonds should be reported on the December 31, 2014, balance sheet.

Explanation / Answer

Commonwealth Company issued bonds with the following provisions (FV of $1, PV of

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