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Rufina [12.5K]
3 years ago
11

Dobbs Company issues 6%, two-year bonds, on December 31, 2018, with a par value of $106,000 and semi-annual interest payments.

Business
1 answer:
Rashid [163]3 years ago
5 0

Answer: See explanation

Explanation:

a. The issuance of bonds on December 31, 2018.

Dec 31, 2018.

Debit Cash $99880

Debit Discount on bonds payable $6120

Credit Bonds payable $106000

(to record bond issue)

b. The first through fourth interest payments on each June 30 and December 31.

June 30

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

Dec, 31.

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

June 30

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

Dec, 31

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

c. The maturity of the bonds on December 31, 2020.

Dec 31,2020

Debit Bonds payable = $106000

Credit Cash = $106000

(To record retirement)

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In each of the following situations, state whether the bonds will sell at a premium or discount. Required a. Valley issued $300,
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Answer:

a. Premium

b. Discount

c. Discount

Explanation:

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Premium (discount) = Bond's stated interest rate - Market rate of interest for similar investments = 7% - 6% = 1% premium

Therefore, Valley's bond will sell at a premium.

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Therefore, River Inc.'s bond will sell at a discount.

3 0
3 years ago
When the decisions of a company are very risky and low-level managers lack decision-making skills, the company will tend to
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