1 answer

Requirements (1) Joumaline the following transactions of Lamore Communication, Inc.(8marks) 2010 Jan 1 Issued $4,000,000 of...

Question:

Requirements (1) Joumaline the following transactions of Lamore Communication, Inc.(8marks) 2010 Jan 1 Issued $4,000,000 of 7
Requirements (1) Joumaline the following transactions of Lamore Communication, Inc.(8marks) 2010 Jan 1 Issued $4,000,000 of 7%, 10-year bonds payable when the market rate is 6%, and the price is 4,297,546. Juli Paid semi-annual interest and amortized the bonds by the effective interest method on the 7% bonds payable. Dec 31 Accrued semi-annual interest expense and amortized the bonds by the effective interest method on the 7% bonds payable. 2011 Jan 1 Paid semi-annual interest. 2020 Jan 1 Paid the 7% bonds at maturity. (2) At December 31, 2010, after all year-end adjustments, determine the carrying amount of Lamore Communication bonds payable, net.(2 marks)

Answers

(1) Journal entries are as prepared below:

Year Particulars L.F Debit ($) Credit ($)
2010
Jan-01 Cash 4,297,546
Premium on Bonds Payable 297,546
Bonds Payable 4,000,000
(For bonds issued at premium)
Jul-01 Interest Expense (4,297,546*6%*6/12) 128,926
Premium on Bonds Payable 11,074
Cash (4,000,000*7%*6/12) 140,000
(For paid for interest)
Dec-31 Interest Expense (4,286,472*6%*6/12) 128,594
Premium on Bonds Payable 11,406
Interest Payable (4,000,000*7%*6/12) 140,000
(For paid for interest)
2011
Jan-01 Interest Payable 140,000
Cash 140,000
(For cash paid on interest)
2020
Jan-01 Bond Payable 4,000,000
Cash 4,000,000
(for bonds matured)

(2) Carrying amount of Bonds on December 31, 2010 is as shown below:

Bonds Payable $4,286,472

.

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