Exercise 10-22

Question 1

Exercise 10-22 Cole Corporation issued $384,000, 6%, 24-year bonds on January 1, 2014, for $303,141. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bond premium or discount.

Prepare the schedule using effective-interest method to amortize bond premium or discount of Cole Corporation. (Round answers to 0 decimal places, e.g. 125.)

Prepare the journal entries to record the issuance of the bonds. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entries to record the accrual of interest and the discount amortization on December 31, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 2 Exercise 10-24 Nance Co. receives $401,000 when it issues a $401,000, 6%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $20,459 on June 30 and December 31. Prepare the schedule using effective-interest method to amortize bond premium or discount of Nance Co. (Round answers to 0 decimal places, e.g. 125.)

Question 3 Problem 9-7A In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine Acquired Cost Salvage Value Useful Life (in years) Depreciation Method 1 Jan. 1, 2012 $129,000 $47,400 8 Straight-line 2 July 1, 2013 98,000 11,100 5 Declining-balance 3 Nov. 1, 2013 76,700 6,300 7 Units-of-activity For the declining-balance method, Farr Company uses the double-declining rate. For the units-ofactivity method, total machine hours are expected to be 32,000. Actual hours of use in the first 3 years were: 2013, 670; 2014, 4,060; and 2015, 5,430.

Question 4 Problem 10-9A Wempe Co. sold $3,374,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually

Question 5 Problem 10-13A Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $186,000 at an annual interest rate of 5%. The loan is repayable over 5 years in annual installments of $42,961, principal and interest, due each June 30. The first payment is due June 30, 2014. Grace uses the effective-interest method for amortizing debt. Her ski hill company’s year-end will be June 30.

Question 6 IFRS 10-4 Ratzlaff Company issues €2 million, 10-year, 8% bonds at 97, with interest payable on July 1 and January 1. Prepare the journal entry to record the sale of these bonds on January 1, 2014. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)