Prepare the journal entries

Burrell Industries’s board of directors authorized the issuance of $60,000,000 in 10-year, 9 percent bonds. The bonds are dated November 1, 2011, and interest is paid semiannually on May 1 and November 1. Burrell closes its books on June 30 each year. The bonds were issued on November 1, 2011, when the market rate of interest was 8 percent.

Required:

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A. Make the amortization schedule for this bond issue.

B. Prepare the journal entries for the issuance of the bonds and the first year of the bond’s life.

C. Describe how the bonds are reported on Burrell’s income statement, balance sheet, and statement of cash flows for the year ended June 30, 2012.

On April 1, 2011, Arnwine Supply issued $50,000,000 in 15-year, 10 percent bonds that pay interest annually on April 1. The bonds were issued on April 1, 2009, when the market interest rate was 11 percent. Arnwine Supply’s fiscal year ends December 31.

Required:

A. Make the amortization schedule for this bond issue.

B. Prepare the journal entries for the first two years of the bond issue’s life.

C. Show how Arnwine Supply reports the events involving the bond issue on its income statement, balance sheet, and statement of cash flows for the years ended December 31, 2011, and December 31, 2012.

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