On October 1 of the current year a corporation sold, at par plus accrued interest,
$1,000,000 of its 12% bonds, which were dated Iuly 1 of this year. What amount of
bond interest expense should the company report on its current year income
statement?

Module Exam 11: Chapters 14 and 15 2012

1. On October 1 of the current year a corporation sold, at par plus accrued interest,
$1,000,000 of its 12% bonds, which were dated Iuly 1 of this year. What amount of
bond interest expense should the company report on its current year income
statement?

2. A company issued 9%, 10-years bonds with a par value of $1,000,000 on
September 1, Year 1 when the market rate was 9%. The bonds were dated June 30,
Year 1. The bond issue price included accrued interest. Interest is paid semiannually
on December 31 and Iune 30.

(a) Prepare the issuer’s journal entry to record the issuance of the bonds on
September 1.

(b) Prepare the issuer’s journal entry to record the semiannual interest payment on
December 31, Year 1.

3. A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is
paid semiannually. The market interest rate on the issue date was 10%, and the
issuer received $95,016 cash for the bonds. On the first semiannual interest date,
what amount of cash should be paid to the holders of these bonds for interest?

4. On January 1, a company issued 10-year, 10% bonds payable with a par value of
$500,000, and received $442,647 in cash proceeds. The market rate ofinterest at
the date of issuance was 12%. The bonds pay interest semiannually on Iuly 1 and
Ianuary 1. The issuer uses the straight-line method for amortization. Prepare the
issuer’s journal entry to record the first semiannual interest payment on Iuly 1.