UMUC ACCT301 homework 5

| September 6, 2016

Question
Horton Micro Chip Company issued $100,000 of face amount of 6-year bonds on January 1, 20X1. The bonds were issed at 103, and bear interest at a stated rate of 8% per annum, payable semiannually. The premium is amortized by the straight-line method.

(a) Prepare the journal entry to record the initial issue on January, 20X1.

(b) Prepare the journal entry that Horton would record on each interest date.

(c) Prepare the journal entry that Horton would record at maturity of the bonds.

(d) How much cash flowed “in” and “out” on this bond issue, and how does the difference compare to total interest expense that was recognized?

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