ACC207 Principles 2 Chapter 10 Homework Problem 1 Control Combos Inc. issued $1,

Question

ACC207 Principles 2 Chapter 10 Homework Problem 1 Control Combos Inc. issued $1,000,000 in 10 year bonds at 98. 1. How much money did Conrol Combos receive from Name the issue of the bonds? 2. Is this issued at a premium or a discount? 3. What is the total amount of the premium or discount?o,oo elooo phahiuh dsecalstralai Problem 2 Brand Company issued $800,000, 1 1 %, 8-year bonds on January 1 , 201 7, at 1 04. The bonds pay semi-annual interest on June 30 and December 31. The company uses the straight-line method of amortization and has a calendar year end. Instructions Prepare all journal entries made to issue the bonds on January 1, 2017 and pays interest on June 30, 2017 and Decmber 31, 2017. Complete the amortization schedule for the first 5 years. Answer 1an-17 C ash 30-Jun-17 count on bonds fayoble Cas 31-Dec-17eense

Explanation / Answer

Answer to Problem 1.

Part 1.
Amount received from Issuance of the Bonds = $1,000,000 * 0.98
Amount received from Issuance of the Bonds = $980,000

Part 2.
Since, the amount received from issuance is less than the Face Value of the Bonds; the Bonds are issued at Discount.

Part 3.
Discount on Bonds = Face Value – Amount received from Issuance
Discount on Bonds = $1,000,000 - $980,000
Discount on Bonds = $20,000

Part 4.
Annual Straight Line Amortization = Amount to be amortized / life of Bonds
Annual Straight Line Amortization = 20,000 / 10
Annual Straight Line Amortization = $2,000

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