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Comprehensive Bond Problem

Please explain how you get answers and don't use PV in Excel. Attached also are PV tables.

2. Bell Company sells $2,400,000 of 6% bonds on June 1, 2010. The
bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds
yield 5% On October 1, 2011, Douglas Company buys back $720,000
worth of the bonds for $738,000 (includes accrued interest). Give the entries through
December 31, 2012.
Jun 1, 10 Cash Amount
Bonds Payable 2,400,000
Premium on Bonds Payable Amount

Maturity value of bonds payable $2,400,000
Present value of $2,400,000 due in 8 periods at 2.5% Formula
Present value of interest payable semiannually Formula
Proceeds from sale of bonds Formula
Premium on bonds payable Formula

Dec 1, 10 Interest Expense Amount
Account Title Amount
Cash [$2,400,000 * 6.00% * (6/12)] 72,000
Note: Amortization table is semi-annual, interest rate is stated as annual value.

Dec 31, 10 Account title Amount
Account title Amount
Account title Amount

Jun 1, 11 Account Title Amount
Account Title Amount
Account Title Amount
Account Title 21,600

Oct 1, 11 Account title Amount
Account title Amount
Account title Amount

Oct 1, 11 Account title Amount
Account title Amount
Account title Amount
Account title Amount

Net carrying amount of bonds redeemed - Par value 720,000
Unamortized premium Amount
Formula
Reacquisition price Amount
Gain on redemption Formula

Dec 1, 11 Account title Amount
Account title Amount
Account title Amount

Dec 31, 11 Account title Amount
Account title Amount
Account title Amount

Jun 1, 12 Account title Amount
Account title Amount
Account title Amount
Account title Amount

Dec 1, 12 Account Amount
Account Amount
Account Amount

Schedule of Bond Discount Amortization
Effective Interest Method
6% Bonds Sold to Yield 5%
Date "Cash
Paid" "Interest
Expense" "Bond
Premium" "Carrying
Value
of Bonds"
Jun 1, 10 Amount
Dec 1, 10 Formula Formula Formula Formula
Jun 1, 11 Formula Formula Formula Formula
Dec 1, 11 Formula Formula Formula Formula
Jun 1, 12 Formula Formula Formula Formula
Dec 1, 12 Formula Formula Formula Formula
Jun 1, 13 Formula Formula Formula Formula
Dec 1, 13 Formula Formula Formula Formula
Jun 1, 14 Formula Formula Formula Formula.

Attachments

Solution Preview

Please see the attached file for the complete tutorial.

NOTE: To look at how each figure was computed, click on that cell to view the computation in the formula bar.

2. Bell Company sells $2,400,000 of 6% bonds on June 1, 2010. The
bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds
yield 5% On October 1, 2011, Douglas Company buys back $720,000
worth of the bonds for $738,000 (includes accrued interest). Give the entries through
December 31, 2012.
Jun 1, 10 Cash 2,486,042
Bonds Payable 2,400,000
Premium on Bonds Payable 86,042

Maturity value of bonds payable $2,400,000
Present value of ...

Solution Summary

The solution explains the comprehensive bond problem and provides an answer.

$2.19