Over the River Co

question 76

Essay

Over the River Co.(OTRC)sells $1,200,000 of 6-year,10% bonds at par plus accrued interest.The bonds are dated January 1,2012 but due to market conditions are not issued until May 1,2012.Interest is payable on June 30 and December 31 each year.
Requirement:
Prepare journal entries to record:
a.The issuance of the bonds on May I,2012.Assume that OTRC has adopted a policy of crediting accrued interest payable for the accrued interest on the date of sale.
b.Payment of interest on June 30,2012.
c.Payment of interest on December 31,2012.

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Definitions:

Substitute Good

A product or service that can be used in place of another to satisfy similar needs or demands.

Market Power

The ability of a company or group of companies to control prices and total market output in an industry or sector.

Elastic Demand

Describes a market scenario where the demand for a product significantly changes in response to changes in the price of that product.

Less Elastic

Less elastic refers to a demand or supply that is relatively unresponsive to changes in price compared to a perfectly elastic curve.