BE14-1 Whiteside Corporation issues ¥500,000 of 9% bonds, due in 10 years, with interest payable semi-
annually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the
bonds using the following factors: Present value of the principal 0.37689 and Present value of the interest
payments 12.46221.
BE14-6 On January 1, 2015, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds
were issued for $559,224, and pay interest each July 1 and January 1. Prepare the company’s journal
entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting
entry. Assume an effective-interest rate of 8%.
BE14-7 Assume the bonds in BE14-6 were issued for $644,636 with the effective-interest rate of 6%.
Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and
(c) the December 31 adjusting entry.
BE14-9 Coldwell, Inc. issued a €100,000, 4-year, 10% note at face value to Flint Hills Bank on January
1, 2015, and received €100,000 cash. The note requires annual interest payments each December 31.
Prepare Coldwell’s journal entries to record (a) the issuance of the note and (b) the December 31 interest
payment.
BE14-10 Samson Corporation issued a 4-year, £75,000, zero-interest-bearing note to Brown Company on
January 1, 2015, and received cash of £47,664. The implicit interest rate is 12%. Prepare Samson’s
journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest.
BE14-11 McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January
1, 2015, and received a computer that normally sells for $31,495. The note requires annual interest
payments each December 31. The market rate of interest for a note of similar risk is 12%. Prepare
McCormick’s journal entries for (a) the January 1 issuance and (b) the December 31 interest.
BE14-13 On January 1, 2015, Henderson Corporation retired $500,000 of bonds at 99. At the time of
retirement, the unamortized premium was $15,000. Prepare Henderson’s journal entry to record the
reacquisition of the bonds.
E14-3 (Entries for Bond Transactions) Presented below are two independent situations.
1. On January 1, 2015, Divac Company issued €300,000 of 9%, 10-year bonds at par. Interest is payable
quarterly on April 1, July 1, October 1, and January 1.
2. On June 1, 2015, Verbitsky Company issued €200,000 of 12%, 10-year bonds dated January 1 at par
plus accrued interest. Interest is payable semiannually on July 1 and January 1.
Instructions
For each of these two independent situations, prepare journal entries to record the following.
(a) The issuance of the bonds.
(b) The payment of interest on July 1.
(c) The accrual of interest on December 31.
E14-6 (Amortization Schedule) Spencer Company sells 10% bonds having a maturity value of
£3,000,000 for £2,783,724. The bonds are dated January 1, 2015, and mature January 1, 2020. Interest is
payable annually on January 1.
Instructions
Set up a schedule of interest expense and discount amortization. (Hint: The effective-interest rate must be
computed.)
E14-8 (Entries and Questions for Bond Transactions) On June 30, 2014, Macias Company issued
R$5,000,000 face value of 13%, 20-year bonds at R$5,376,150 to yield 12%. The bonds pay semiannual
interest on June 30 and December 31.
Instructions
(a) Prepare the journal entries to record the following transactions.
(1) The issuance of the bonds on June 30, 2014.
(2) The payment of interest and the amortization of the premium on December 31, 2014.
(3) The payment of interest and the amortization of the premium on June 30, 2015.
(4) The payment of interest and the amortization of the premium on December 31, 2015.
(b) Show the proper statement of financial position presentation for the liability for bonds payable on the
December 31, 2015, statement of financial position.
(c) Provide the answers to the following questions.
(1) What amount of interest expense is reported for 2015?
(2) Determine the total cost of borrowing over the life of the bond.
E14-20 (Entries for Settlement of Debt) Consider the following independent situations.
(a) Gottlieb Co. owes €199,800 to Ceballos Inc. The debt is a 10-year, 11% note. Because Gottlieb Co. is
in financial trouble, Ceballos Inc. agrees to accept some land and cancel the entire debt. The land has a
book value of €90,000 and a fair value of €140,000. Prepare the journal entry on Gottlieb’s books for debt
settlement.