H&l Pines Journal Entries

Entry

Transaction

Debit

Credit

6.5% Bonds Payable

1.

Cash

6,364,864

6.5% Bond Payable

6,364,864

Face Value: $1,000/ bond × 6,500 bonds = $6,500,000

n = 5 years × 2 payments/year = 10

i = 7% ÷ 2 = 3.5%

PV Principal: $6,500,000 × 0.70892 = $4,607,980

PV Interest: ($6,500,000 × 6.5% × 6/12) × 8.31661 = $1,756,884

PV Bond: $4,607,980 + $1,756,884 = $6,364,864

2.

Bond interest expense

222,770

Cash

211,250

6.5% Bond Payable

11,520

Bond interest expense: $6,364,864 × 7% × 6/12 = $222,770

Bond interest payment: $6,500,000 × 6.5% × 6/12 = $211,250

Amortization: $222,770 – $211,250 = $11,520

3.

Bond interest payable

167,390

Bond interest payable

158,438

6.5% Bond Payable

8,942

Bond interest expense: ($6,364,864 + $11,520) × 7% × 4.5/12 = $167,380

Interest payment: $6,500,000 × 6.5% × 4.5/12 = $158,438

Amortization: $167,380 – $158,438 = $8,942

9.5% Bond Payable

4.

Bond interest expense

58,264

Bond interest payable

126,667

9.5% Bond Payable

5,069

Cash

190,000

Bond interest expense: $4,369,790 × 8% × 2/12 = $58,264

Interest payment: $4,000,000 × 9.5% × 2/12 = $63,333

Amortization: $63,333 – $58,263 = $5,069

Total cash paid: $126,667 + $63,333 = $190,000

Entry

Transaction

Debit

Credit

5.

Bond interest expense

174,589

9.5% Bond Payable

15,411

Cash

190,000

Bond interest expense: ($4,369,790 – $5,069) × 8% × 6/12 = $174,589

Interest payment: $4,000,000 × 9.5% × 6/12 = $190,000

Amortization: $190,000 – $174,589 = $15,411

6.

Bond interest expense

39,144

9.5% Bond payable

3,606

Cash

42,750

Bond int. exp: ($4,369,790 – $5,069 – $15,411) × 45% × 8% × 3/12 = $39,144

Interest payment: $4,000,000 × 9.5% × 3/12 = $42,750

Amortization: $42,750 – $39,144 = $3,606

7.

9.5% Bond Payable

1,953,584

Loss on recall

116,416

Cash

2,070,000

Face Value: $4,000,000 × 45% = $1,800,000

Cash paid for recall: $1,800,000 × 115% = $2,070,000

CV: [($4,369,790 – $5,069 – $15,411) × 45%] – $3,606 = $1,953,584

Loss: $2,070,000 – $1,953,584 = $116,416

8.

Bond interest expense

63,790

9.5% Bond payable

5,877

Bond interest payable

69,667

Bond int. exp.: ($4,369,790 – $5,069 – $15,411) × 55% × 8% × 4/12
= $63,790

Interest payment: $4,000,000 × 55% × 9.5% × 4/12 = $69,667

Amortization: $69,667 – $63,790 = $5,877

Apr. 1/11

May 15/11

Nov. 15/11

Mar. 31/12

6 months

4.5 months

FYB

Bonds issued

Interest payment

FYE

Apr. 1/11

Jun. 1/11

Dec. 1/11

Feb. 29/12

Mar. 31/12

4 months

2 months

Last payment date

FYE

Interest payment

Interest payment

Recall 45%

FYE

Accounts Payable

Taxes Payable

Bond Interest Payable

O/B

54,398

O/B

300,175

O/B

126,667

9.5% Bond Payable

O/B

4,369,790

Cash

Accounts Payable

Taxes Payable

Bond Interest Payable

6,384,864

(1)

O/B

54,398

O/B

300,175

O/B

126,667

(2)

211,250

(3)

158,438

(4)

190,000

126,667

(4)

(5)

190,000

(8)

69,667

(6)

42,750

(7)

2,070,000

9.5% Bond Payable

6.5% Bond Payable

O/B

4,369,790

(1)

6,363,864

5,069

(4)

(2)

11,520

15,411

(5)

(3)

8,942

3,606

(6)

1,953,584

(7)

5,877

(8)

Bond Interest Expense

Loss on Recall

222,770

(2)

116,416

(7)

167,380

(3)

58,264

(4)

174,589

(5)

39,144

(6)

63,790

(8)