Assume tat on December 31, 2009, Peder Sat issued NKR 10 milion of 7 year, 4% de

Question

Assume tat on December 31, 2009, Peder Sat issued NKR 10 milion of 7 year, 4% debe tues. Proceeds were MR7 887 OO; therefore, he market e of interest was 8%. NKR s the Non ngan kener Read the reairements Requirement 1. By using the balance sheet equation format, prepare an analysis of transactions for Peder Satu. Key your transactions as follows: (a) issuance, (b) first semiannual interest using effective interest amortization of bond discount, and (c) payment of maturity value. Round all amounts to the nearest thousand. (Abbreviation used: RE Retained Earnings. Use parentheses or a minus sign for a decrease in an accounting equation component. For contra accounts, show increases as negative and decreases as positive. Do not round unbil your final answers, then round to the nearest thousand. Leave any unused cells blank Assets Liabilities Stockholders' Equity Bonds Cash Payable Discount on Bonds Payable Premium on Bonds Payable RE: Interest Expense

Explanation / Answer

Req 1) cash equal to Bonds payable Discount on Bonds payable Premium on Bonds Payable RE: Interest Expense a 7887000 equal to 10000000 -2113000 b -200000 equal to 115480 -315480 10000000*2%=200000 c -10000000 equal to -10000000 Req 2: Journal entries: a) Debit Cash 7887000 Debit Discount on Bonds payable 2113000 credit Bonds payable 10000000 b) Debit Interest expense 315480 Credit Discount on Bonds payable 115480 Credit Cash 200000 c) Debit Bonds payable 10000000 Credit Cash 10000000 Balance Sheet balances: Dec 31 09 Dec 31 10 BP 10000000 10000000 Less: discount 2113000 1997520 Net Liability 7887000 8002480

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