ACC 304 All Assignments ACC 304 All Assignments | Page 233

(i)
Bonds payable (due in 3 years)
5) On June 30, 2014, Mischa Auer Company issued $4,166,000 face
value of 13%, 20-year bonds at $4,479,407, a yield of 12%. Auer uses
the effective-interest method to amortize bond premium or discount.
The bonds pay semiannual interest on June 30 and December 31.
(a) Prepare the journal entries to record the following transactions.
(Round answers to 0 decimal places, e.g. 38,548. If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts.
Credit account titles are automatically indented when amount is
entered. Do not indent manually.)
(b) Show the proper balance sheet presentation for the liability for
bonds payable on the December 31, 2015, balance sheet. (Round
answers to 0 decimal places, e.g. 38,548.)
(c) Provide the answers to the following questions.
6) Fallen Company commonly issues long-term notes payable to its
various lenders. Fallen has had a pretty good credit rating such that its
effective borrowing rate is quite low (less than 8% on an annual basis).
Fallen has elected to use the fair value option for the long-term notes