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# Qix Corporation issued bonds: Prepare journal entries for is

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On Jan. 1, 2009, Qix Corp. issued \$477,000 of 7% bonds, due in 10 years. The bonds were issued for \$444,589, and pay interest each July 1 and Jan 1. Qix uses the effective interest method.

Prepare the company's journal entries for
(a) the Jan 1 issuance,
(b) the July 1 interest payment, and
(c) the Dec 31 adjusting entry.

Assume an effective interest rate of 8%. (Round answer to 0 decimal places, i.e. 12,354. List multiple debit/credit entries in of magnitude.) Please show interest calculations for journal entries.

#### Solution Preview

See Excel attached. Click in cells to see computation.

The journal entries are based on the bond amortization ...

#### Solution Summary

The journal entries are based on the bond amortization schedule. See the Excel spreadsheet where I show you how to construct this. Each column has a note telling you what belongs in that column. Click in each cell to see the computation. The entries are then created by pointing at the relevant amount in the amortization schedule. This is a template that you can now use for any bond problem.

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## Ghostbusters Corporation issues \$300,000 of 9% bonds

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1) Ghostbusters Corporation issues \$300,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Computer the issue price of the bonds.

2) Toy Story Corporation issued \$500,000 of 6% bonds on May 1, 2008. The bonds were dated January 1, 2008, and mature January 1, 2013, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Toy Story's journal entries for the May 1 issuance, the July 1 interest payment, and the December 31 adjusting entry.

3) On January 1, 2008, Qix Corporation issued \$400,000 of 7% bonds, due in 10 years. The bonds were issued for \$372,816, and pay interest each July 1 and January 1. Qix uses the effective interest method. Prepare the company's journal entries for the January 1 issuance, the July 1 interest payment, and the December 31 adjusting entry. Assume an effective interest rate of 8%.

4) On January 1,2008, Uncharted Waters Corporation retired \$600,000, of bonds at 99. At the time of retirement, the unamortized premium was \$15,000 and unamortized bond issue costs were \$5,250. Prepare the corporation's journal entry to record the reacquisition of the bonds.

5) The Goofy Company issued \$200,000 of 10% bonds on January 1, 2008. The bonds are due January 1, 2013 with interest payable July 1 and January 1. Assume the bonds were issued at 98. Prepare the journal entries for January 1, July 1, and December 31. The company uses straight line amortization annually on December 31.

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