Bold Accountants Co

question 90

Essay

Bold Accountants Co. sells $6,000,000 of 10-year, 6% bonds priced to yield 5.5%. The bonds are dated and issued on January 1, 2020. Interest is payable on January 1 and July 1 each year. Bold's year-end is June 30.
Required:
Prepare entries for
a. The issuance of the bonds.
b. Accrual of interest and related amortization on June 30, 2020.
c. Payment of interest on July 1,2020.
d. Payment of interest and related amortization on January 1,2021.

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Definitions:

Direct Labor

Direct labor comprises the labor costs of workers directly involved in the production of goods or services.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a unit of product.

Fixed Manufacturing Overhead

Ongoing expenses that do not change in total with the level of production or sales volume, such as salaries, rent, and insurance, associated specifically with the manufacturing process.

Variable Costing

An accounting method that includes only variable costs—those that change with production levels—in the cost of goods sold and inventory valuation.