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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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EXERCISE 10-7

Purpose: (L.O. 5) This exercise will illustrate the journal entry required to record the issuance of bonds at a price other than par.

The Russell Corporation issued 4,000 bonds dated May 1, 2014. These bonds are 10-year term bonds with a face value of $1,000 each and a stated interest rate of 8%. Interest is payable semiannually on November 1 and May 1.

Instructions

  1. Prepare the journal entry to record the sale of these bonds on May 1, 2014. Assuming the bonds are sold for a total of $4,055,000.
  2. Ignore the assumption in part (a) above. Prepare the journal entry to record the sale of these bonds on May 1, 2014, assuming the bonds are sold on May 1, 2014, and the proceeds amount to $3,950,000.

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