Yale Corporation issued to Zap Corporation $48,000, 8% (cash interest payable semiannually on June 30 and December 31) 10-year bonds dated and sold on January 1, 2020. Assume that the company uses the effective interest amortization method. If the bonds were sold to yield 9%, provide journal entries to be made at each of the following dates. a. January 1, 2020, for issuance of bonds. b. June 30, 2020, for the interest payment. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answers to the nearest whole dollar. Cr. Dr. 54,957 X X 0 Date Account Name a. Jan. 1, 2020 Cash Discount on Bonds Payable Bonds Payable b. June 30, 2020 Interest Expense Discount on Bonds Payable Cash 60,000 5,403 x 0 2,457 X 0 X 57 x 2,400 x

Yale Corporation

Journal Entries:

a. January 1, 2020:

Debit Cash $44,878

Debit Premium on bonds $3,122

Credit 8% Bonds Payable $48,000

To record issuance of the bonds.

b. June 30, 2020:

Debit Interest Expense $2,020

Credit Bond Discounts $100

Credit Cash $1,920

To record the first payment of interest.

Explanation:

a) Data and Calculations:

January 1, 2020:

Face value of bonds = $48,000

Price of bonds =           $44,878

Discounts on bonds =    $3,122

Coupon interest rate = 8%

Interest payment = semiannually on June 30 and December 31

Maturity period = 10 years

Effective interest rate = 9%

June 30, 2020:

Interest Expense      $2,020 ($44,878 * 4.5%)

Cash payment             1,920 ($48,000 * 4%)

Discount amortization $100

Value of Bonds =   $44,978 ($44,878 + $100)

December 31, 2020:

Interest Expense      $2,024 ($44,978 * 4.5%)

Cash payment             1,920 ($48,000 * 4%)

Discount amortization $104

Value of Bonds =   $45,082 ($44,978 + $104)

N (# of periods)  20

I/Y (Interest per year)  9

PMT (Periodic Payment)  1920

FV (Future Value)  48000

Results

PV = $44,878.10

Sum of all periodic payments$38,400.00

Total Interest$41,521.90

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.