## Question

###### 1 2 Environmental Concerns Limited (ECL) issued $500,000 of 10 year, 6.5% bonds payable at par...

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Environmental Concerns Limited (ECL) issued $500,000 of 10 year, 6.5% bonds payable at par value on May 1, 2018. The bonds pay interest each April 30 and October 31, and the company ends its accounting year on December 31. Requirements: 1. Fill in the blanks: a. ECL's bonds are priced at b. When ECL's issued its bonds, the market interest rate was 2. Journalize for ECL: a. Issuance of the bonds on May 1, 2018. b. Payment of interest on October 31, 2018. c. Accrual of interest at December 31, 2018. d. Payment of interest on April 30, 2019.

Educators Credit Union (ECU) issued $300,000 of 20 year, 6% bonds payable on March 1, 2018. The bonds pay interest each February 28 and August 31, and the company ends its accounting year on December 31. Requirements: 1. Fill in the blanks: a. If the market rate of interest is 5% when ECU issued its bonds, will the bonds be priced at par, at a premium, or at a discount? b. If the market interest rate is 7% when ECU issued its bonds, will the bonds be priced at par, at a premium, or at a discount? c. Journalize the following for ECU assuming the bonds are issued at 98: d. Issuance of the bonds on March 1, 2018. e. Payment of interest and amortization of discount on August 31, 2018. f. Accrual of interest and amortization of discount at December 31, 2018. g. Payment of interest and amortization of discount on February 28, 2019. 73 words Type here to search o te w 9

## Answers

1- A- ECL bonds are priced at Par value B- market rate 6.50% 2- date explanation debit credit 1-May cash 500000 bonds payable 500000 31-Oct interest expense 16250 cash 16250 31-Dec interest expense 5416.67 interest payable 5416.67 30-Apr interest expense 10833.33 interest payable 5416.67 cash 16250 2- A- At premium b- At discount 2- date explanation debit credit 1-Mar cash 294000 discount on bonds payable 6000 bonds payable 300000 31-Aug interest expense 9150 discount on bonds payable 150 cash 9000 31-Dec interest expense 6100 discount on bonds payable 100 interest payable 6000 28-Feb interest expense 3050 interest payable 6000 discount on bonds payable 50 cash 9000

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