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Accounting questions for Bentwood company

(See attached file for full problem description)

1. On January 1, 2003, Bentwood Company issued bonds with a face value of $400,000. The bonds carry a stated interest rate of 10 percent that is payable each July 1 and January 1.

Instructions:

a. Prepare the journal entry for the issuance assuming the bonds are issued at 97.
b. Prepare the journal entry for the issuance assuming the bonds are issued at 102.

2. Equipment was acquired on January 1, 2000, at a cost of $120,000. The equipment
was originally estimated to have a salvage value of $5,000 and an estimated life of 10
years. Depreciation has been recorded through December 31, 2003, using the straight-
line method. On January 1, 2004, the estimated salvage value was revised to $6,000
and the use life was revised to a total of 8 years.

Instructions:

Determine the Depreciation Expense for 2004.

3. The following data exists for Curan Company.

2004 2003
Accounts Receivable $ 80,000 $ 90,000
Net Sales 510,000 410,000

Instructions:

Calculate the accounts receivable turnover ratio and the average collection period for accounts receivable in days.

Attachments

Solution Preview

Please see the attached file.

1.

On January 1, 2003, Bentwood Company issued bonds with a face value of $400,000. The bonds carry a stated interest rate of 10 percent that is payable each July 1 and January 1.

Instructions:

a. Prepare the journal entry for the issuance assuming the bonds are issued at 97.

If the bonds are issued at 97, it means that they are issued at a discount. The face value of the bonds is 400,000. Issue at 97 means that the cash proceeds are 400,000X.97=388,000. The bond discount is 400,000-388,000=12,000.
The journal entry is
Cash Dr 388,000
Discount on Bonds Payable Dr 12,000
Bonds Payable Cr 400,000

b. Prepare the journal entry for the issuance assuming the bonds are issued at 102.

If ...

Solution Summary

The solution has 3 accounting questions relating to bonds, depreciation and accounts receivable. The journal entry for the issuance assuming the bonds are issued are determined.

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