Chapter 8
Non-Current Liabilities
400
d) Show the balance sheet presentation of Bonds Payable and related accounts as at
December 31, 2016.
AP-12A (
2
4
5
)
Fountain Hills Corporation is planning to build a new arena for the community. To complete
the project, the company is issuing $3,000,000 worth of five-year, 10% bonds with interest
paid semi-annually.
On May 1, 2016, the company completed all the necessary paperwork and is now ready
to issue the bonds. The market rate on the date of issuance is 8%. The company uses the
effective interest method to amortize any premiums or discounts.
Required
Record journal entries for the following items. Round all amounts to the nearest whole dollar.
a) The issuance of the bond on May 1, 2016 (Hint: This will require the calculation of the
premium/discount).
b) The payment of interest on October 31, 2016.
c) The necessary adjusting entries at the company’s December 31, 2016 year-end.
d) The payment of interest on April 30, 2017.
e) The retirement of the bonds on May 1, 2021 (assume interest has already been paid).
