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Webster company issues $1,000,000 face value, 6%, 5-year bonds payable on dec 31,2009. Interest is paid semi-annually each June 30 and Dec. 31. The bonds sell at a price of 97; Webster uses the straight-line method of amortizing bond discount or premium. I need answers for A. The entry made by Webster co. To recor insurance of the bonds payable at dec 31, 2009. B. websters entry at June 30,2010 to recor the first semi-annual payment of interest and amortization of discount on the bonds. C. The amount of bond interest expense recognized by Webster co. In 2010 with respect to these bonds is... D. The carrying value of this liability in Webster co. Dec. 31, 2010 balance sheet is...need answer ASAP!
Hi,Thanks for the question. A. The entry made by Webster co. To recor insurance of the bonds payable at dec 31, 2009. bond discount = 3% x 1,000,000 = $30,000Journal entry:Cash (debit) $970,000Discount on Bonds Payable (debit) $30,000Bonds Payable (credit) $1,000,000B. websters entry at June 30,2010 to recor the first semi-annual payment of interest and amortization of discount on the bonds. Amortization of bond discount = $30,000 / 10 semi-annual periods = $3000Journal Entry:Bond Interest Expense (debit) $33,000Cash (credit) $30,000Amortization of bond discount (credit) $3000C. The amount of bond interest expense recognized by Webster co. In 2010 with respect to these bonds is... $33,000 bond interest expense x 2 = $66,000D. The carrying value of this liability in Webster co. Dec. 31, 2010 balance sheet isCarrying value = Face value - discount + amortization of discount = 1,000,000 - 30,000 + 6,000 = $976,000Hope this helps!
Experience: Bachelors degree and CPA with Accounting experience.