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Compound journal entry to record provision for taxes

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Reference no: EM13144920

On January 1, 2009, Mania Enterprises issued 12% bonds dated January 1, 2009, with a face amount of $20 million. The bonds mature in 2018 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.

Required:

1. Determine the price of the bonds at January 1, 2009.

2. Prepare the journal entry to record the bond issuance by Mania on January 1, 2009.

3. Prepare the journal entry to record interest on June 30, 2009, using the effective interest method.

4. Prepare the journal entry to record interest on December 31, 2009, using the effective interest method.

Gore Company, organized on January 2, 2009, had pretax accounting income of $7,000,000 and taxable income of $10,000,000 for the year ended December 31, 2009. The 2009 tax rate was 40%. The only difference between book and taxable income is estimated warranty costs. Expected payments and scheduled enacted tax rates are as follows:

Required:

Prepare one compound journal entry to record Gore's provision for taxes for the year 2009.

Reference no: EM13144920

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