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Joe Co. is building a new hockey arena at a cost of dollar 2,000,000. It received a down payment of dollar 500,000 from local businesses to support the project, & now needs to borrow $1,500,000 to finish the project. It therefore decides to issue dollar 1,500,000 of 10.5%, ten (10) year bonds. These bonds were issued on January 1, 2005, & pay interest yearly on each January 1. The bonds yield 10 percent. Joe paid $50,000 in bond issue costs related to the bond sale.

Instruction

[A] Make journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2005.

[B] Create a bond amortization schedule up to and including January 1, 2009, using the effective interest method.

[C] Suppose that on July 1, 2008, Joe Co. retires half of the bonds at a cost of dollar 800,000 plus accrued interest. Make journal entry to record this retirement.

(L0 4) P15-5 (Treasury Stock-Cost Method) Before Polska Corporation engages in the treasury stock transactions listed below, its general ledger reflects, among others, the following account balances [par value of its stock is dollar 30 per share].

Paid-in Capital in Excess of Par

Common Stock

Retained Earnings

$99,000

$270,000

$80,000

Instructions

Record the treasury stock transactions [given below] under the cost method of handling treasury stock; apply the FIFO method for purchase-sale purposes.

[A] Bought 380 shares of treasury stock at dollar 39 per share.

[B] Bought 300 shares of treasury stock at dollar 43 per share.
[C] Sold 350 shares of treasury stock at dollar 42 per share.
[D] Sold 120 shares of treasury stock at dollar 38 per share.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M920865

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