11) Interest earned on the sinking fund will be subtracted from the Sinking Fund account.

12) On January 1, Auctions Online issued $300,000, 9%, 10-year bonds to lenders at the contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries:

 

a. Issued the bonds.

b. Paid first semiannual interest payment.

c. Retired the bonds at maturity.

 

13) Greg Corporation issued on January 1, $650,000 of 11%, 5-year bonds at contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries:

 

a. Issued the bonds.

b. Paid the first semiannual interest payment.

c. Retired the bonds at maturity.

14) Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the future maturity of its bonds. During the first year, the fund earned $3,825. At the time of bond redemption, the fund has a balance of $417,000. Of this, $400,000 was used to redeem the bonds. Journalize the a) initial deposit; b) the first year’s interest; and c) the redemption of the bonds.

 

15) Bonds that can be bought back by the corporation before the maturity date are called ________ bonds.

 

16) What is the purpose of a bond sinking fund?

 

 

 



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