E10-6 According to the accountant of Ulner Inc., its payroll taxes for the week were as follows:

 

 

 

$198.40 for FICA taxes, $19.84 for federal unemployment taxes, and $133.92 for state

 

unemployment taxes.

 

 

Instructions

 

 

Journalize the entry to record the accrual of the payroll taxes

 

E10-8 Jim Thome has prepared the following list of statements about bonds.

 

1. Bonds are a form of interest-bearing notes payable.

 

2. When seeking long-term financing, an advantage of issuing bonds over issuing common

 

 

 

stock is that stockholder control is not affected.

 

 

3. When seeking long-term financing, an advantage of issuing common stock over issuing

 

 

 

bonds is that tax savings result.

 

 

4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds.

 

5. Secured bonds are also known as debenture bonds.

 

6. Bonds that mature in installments are called term bonds.

 

7. A conversion feature may be added to bonds to make them more attractive to bond buyers.

 

8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate.

 

9. Bond prices are usually quoted as a percentage of the face value of the bond.

 

10. The present value of a bond is the value at which it should sell in the marketplace.

 

*E10-18 Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for

 

 

 

$562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable

 

semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize

 

bond premium or discount.

 

 

Instructions

 

 

Prepare the journal entries to record the following. (Round to the nearest dollar.)

 

 

(a) The issuance of the bonds.

 

(b) The payment of interest and the discount amortization on July 1, 2011, assuming that interest

 

 

 

was not accrued on June 30.

 

 

(c) The accrual of interest and the discount amortization on December 31, 2011.

 

P10-3A On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The

 

 

 

bonds were dated May 1, 2011, and pay interest semiannually on May 1 and November 1.

 

Financial statements are prepared annually on December 31.

 

 

Instructions

 

 

(a) Prepare the journal entry to record the issuance of the bonds.

 

(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2011.

 

(c) Show the balance sheet presentation on December 31, 2011.

 

(d) Prepare the journal entry to record payment of interest on May 1, 2012, assuming no accrual

 

 

 

of interest from January 1, 2012, to May 1, 2012.

(e) Prepare the journal entry to record payment of interest on November 1, 2012.

 

(f) Assume that on November 1, 2012, Newby calls the bonds at 102. Record the redemption of

 

 

 

the bonds.

 

P10-6A On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-year

 

 

 

bonds at $2,271,813.This price resulted in an effective-interest rate of 8% on the bonds. Atwater

 

uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual

 

interest July 1 and January 1.

 

 

Instructions

 

 

(Round all computations to the nearest dollar.)

 

 

(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011.

 

(b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bond

 

 

 

issue.

 

 

(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium

 

 

 

on December 31, 2011.

 

 

(d) Prepare the journal entry to record the payment of interest and the amortization of the

 

 

 

premium on July 1, 2012, assuming no accrual of interest on June 30.

 

 

(e) Prepare the journal entry to record the accrual of interest and the amortization of