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  #1  
Old 02-06-2010, 06:30 PM
shelbymustang616 shelbymustang616 is offline
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Any body a CPA or have an accounting degrre i ahve a ?

Here is a problem I am having for a school assignment, I am a business major. I have seen i recent forums guys posting about they have accoutning backgrounds and i figured maybe I would come across someone who could lend me a hand. I am having a problem with letter D

On the first day of its fiscal year, Robbins Company issued $50,000,000 of five-year, 8% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at an effective interest rate of 11%, resulting in Robbins Company receiving cash of $44,346,760

A Journalize the entry to record the sale of the bonds. If an amount box does not require an entry, leave it blank.

Cash 44346760
Discounts on Bonds Payable 5653240
Bonds Payable 50000000

B Journalize the entry to record the first semiannual interest payment. (Amortization of discount is to be recorded annually.)

Interest expense 2000000
Cash 2000000

C Journalize the entry to record the second semiannual interest payment
Interest exp. 2000000
Cash 2000000

D Journalize the entry to record the amortization of discount at the end of the first year, using the straight-line method. (Round to the nearest dollar.)

Interest Exp. ?
Discount on Bonds Payable ?
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  #2  
Old 02-07-2010, 01:36 AM
britsteroni britsteroni is offline
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Was there more information for the problem??
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  #3  
Old 02-07-2010, 12:48 PM
shelbymustang616 shelbymustang616 is offline
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Nope thats all they give me. In the text it shows an amortizations schedule but they arnt asking for it here Im assuming. All they want is the Interest expense and Discount to bonds.
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  #4  
Old 02-07-2010, 01:45 PM
britsteroni britsteroni is offline
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Is it an online homework problem? (where it gives the answer if you get it wrong) I am assuming they are asking for a debit to interest expense and a credit to the discount (even though they give no info in the problem) for the amount of amortization scheduled for the first year.

Post more info if you have any and I would be glad to help.
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  #5  
Old 02-07-2010, 02:50 PM
shelbymustang616 shelbymustang616 is offline
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You are correct They want INterest exp./ Depit and Bonds Credited and it is an online program called cenage. If you put the right answer in it will tell you. Ive been scratching my head on this one for couple days. I have trouble with amortization.
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  #6  
Old 02-07-2010, 03:05 PM
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whosedog whosedog is offline
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Apparently spelling too(degree)
THE SPELLING POLICE JK
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  #7  
Old 02-07-2010, 03:14 PM
shelbymustang616 shelbymustang616 is offline
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haha yea yea i know, spell check not watchin what im typing
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  #8  
Old 02-08-2010, 12:57 PM
Stevegotcrabgrass Stevegotcrabgrass is offline
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you cant debit interest expense and credit discount only. It will not balance. The interest expense is based of the face of the bond. Interest expense = (Face value x stated rate) plus discount amortization

Dr Interest Expense (this will be cash paid for face value plus discount amortization
Cr. Discount on Bond Payable
Cr. Cash.
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  #9  
Old 02-09-2010, 03:15 PM
shelbymustang616 shelbymustang616 is offline
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Hey Steve thanks for the reply and the help. Unfortunately i had to send the work in as is. I'll take your word for how the problem should be done but the software wanted the way i had it demonstrated. My prof even says the software can make doing the problems a pain in the ass. But again thaks for all your help guys.
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  #10  
Old 02-09-2010, 04:42 PM
Stevegotcrabgrass Stevegotcrabgrass is offline
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What was the correct answer?
Dr. Interest expense
Cr. Discount

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No problem. You will be very happy the amount of help having a background in finance/accounting will be in running your business.
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