ACC 112 Project 1D Following are independent situations: Nicholas Ram Corporatio

Question

ACC 112 Project 1D Following are independent situations: Nicholas Ram Corporation have a $2,400,000 "bond issue" dated March 1, 2016 due in 15 years with an annual interest rate of 10%. Interest is payable March 1 and September 1, On August 1, 2016, the bond was sold for $2,478,750 plus accrued interest. Using the straight-line method, prepare the general journal entries for each of the following: a) The issuance of the bond on August 1, 2016. b) Payment of the semi-annual interest and the amortization of the premium on September 1, 2016. c) Accrual of the interest and the amortization of the premium on December 31, 2016. d) Payment of the semi-annual interest and the amortization of the premium on March 1, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Do not use dollar signs ($) when entering amounts. To see comma-formatted numbers reflected in your final answers, you must enter your answers with commas. Round answers to 2 decimal places, e.g. 5,275.25.) Date Account Titles and Explanation 2016 Aug. 1 Debit Credit Sept. 1

Explanation / Answer

a) The issuance of the bond on August 1, 2016 Date Account Titles & Explanation Debit Credit Aug. 1 Cash $2,578,750 Premium on Bonds payable $78,750 Bonds Payable $2,400,000 Bonds Interest payable $100,000 Interest is accrued for 5 months b) Payment of the semiannual interest and the amortization of the premium on Sept 1, 2016 Sept. 1 Interest expense $20,000 Premium on Bonds payable $2,625 Bonds Interest payable $100,000 Cash $122,625 Semiannual Interest expense = $2400000 x 10% x 1/2 = $120000 Premium amortization = $78750 / 15 years x 1/2 = $2625 semiannually c) Accrual of the interest and the amortization of the premium on December 31, 2016 Dec. 31 Interest expense $80,000 Premium on Bonds payable $1,750 Interest payable $81,750 Interest expense for 4 months = $240000/12 x 4 months = $80000 Premium amortization for 4 months = $5250/12 x 4 months = $1750 d) Payment of semiannual interest and the amortization of premium on March 1, 2017 Mar. 1 Interest payable $81,750 Interest expense $40,000 Premium on Bonds payable $875 Cash $122,625 Interest expense for 2 months = $20000 x 2 = $40000 Premium amortization for 2 months = $875 Bonds issued at discount a) The issuance of the bond on April 1, 2016 Date Account Titles & Explanation Debit Credit April. 1 Cash $688,800 Discount on bonds payable $82,600 Bonds Payable $760,000 Bonds Interest payable $11,400 Interest accrued for 2 months b) Payment of the semiannual interest and the amortization of the discount on August 1, 2016 Aug. 1 Interest expense $22,800 Bonds Interest payable $11,400 Discount on bonds payable $4,130 Cash $30,070 Semiannual Interest expense = $760000 x 9% x 1/2 = $34200 Discount amortization = $82600 / 10 years x 1/2 = $4130 semiannually c) Accrual of the interest and the amortization of the discount on December 31, 2016 Dec. 31 Interest expense $28,500 Discount on bonds payable $3,442 Interest payable $25,058 Interest expense for 5 months = $68400/12 x 5 months = $28500 Discount amortization for 5 months = $8260/12 x 5 months = $3442 d) Payment of semiannual interest and the amortization of discount on Feb 1, 2017 Feb. 1 Interest payable $25,058 Interest expense $5,700 Discount on bonds payable 688 Cash $30,070 Interest expense for 1 months = $5700 Discount amortization for 1 months = $688

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