(Learning Objective 2: Accounting for bonds payable at a discount and amortizing by the straight line method)
- Journalize the following transactions of Ski Boats Unlimited:
|
20X4 |
|
|
Jan. 1 |
Issued $100,000 of 8%, 5 year bonds payable at 94. |
|
July 1 |
Paid semiannual interest and amortized the bonds by the straight line method on our 8% bonds payable. |
|
Dec. 31 |
Accrued semiannual interest expense and amortized the bonds by the straight line method on our 8% bonds payable. |
|
20X9 |
|
|
Jan. 1 |
Paid semiannual interest. |
|
20X5 |
|
|
Jan. 1 |
Paid the 8% bonds at maturity. |
2. At December 31, 20X4, after all year end adjustments, determine the carrying amount of Ski Boats Unlimited’s bonds payable, net.
3. For the 6 months ended July 1, 20X4, determine the following for Ski Boats Unlimited:
a. Interest expense b. Cash interest paid What causes interest expense on the bonds to exceed cash interest paid?