Bonds Issued at Par - Basic Concepts

question 171

Essay

Bonds issued at par - basic concepts
On 1 April, Year 1, Olsen Products, Inc. issued at par $25 million of 10%, 10-year bonds payable. Interest is payable semiannually each 1 April and 1 October.
(a) What is the amount of cash paid to bondholders for interest during year 1?
$_______________
(b) Give the adjusting entry necessary at 31 December, Year 1 (if any), regarding this bond issue.
(c) Interest expense on this bond issue reported in Olsen Products' Year 1 income statement is:
$_______________
(d) With respect to this bond issue, Olsen Products' statement of financial position at 31 December, Year 1, includes bonds payable of $__________________ and interest payable of $_______________ (indicate $0 or "none" if the item is not reported.
(e) Give the journal entry made by Olsen Products on 1 April, Year 2, to record the semiannual payment of interest to bondholders.

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Definitions:

Tolman

Tolman is known for his contribution to cognitive psychology, particularly for his theory of latent learning and cognitive maps in rats.

Holistic Point of View

An approach that emphasizes understanding the whole person or system rather than analyzing its parts in isolation.

Tolman's Theory

Edward C. Tolman's theory of cognitive behaviorism, suggesting that learning involves the acquisition of knowledge rather than just responses to stimuli, emphasizing cognitive maps and latent learning.

Incentive Motivation

Motivation driven by the desire to gain external rewards or avoid negative outcomes.