Question

In: Accounting

On January 1, 2017, Hawkins Industries issues bonds that have a $100,000 par value, mature in...

On January 1, 2017, Hawkins Industries issues bonds that have a $100,000 par value, mature in 10 years, and pay 6% interest semiannually on June 30 and December 31. The bonds were issued at 95.

Prepare the journal entry to record the issuance of the bonds on January 1, 2017

Prepare the journal entry to record the first interest payment on June 30, 2017, assuming that the bond discount or premium is amortized using the straight-line method.

On January 1, 2017, Hawkins Industries issues bonds that have a $100,000 par value, mature in 10 years, and pay 4% interest semiannually on June 30 and December 31. The bonds were issued at 102.

Prepare the journal entry to record the issuance of the bonds on January 1, 2017.

Prepare the journal entry to record the first interest payment on June 30, 2017, assuming that the bond discount or premium is amortized using the straight-line method.

Solutions

Expert Solution

Answer 1 : Journal Entries Bonds issued at discount (issued at 95)

Date Accounts Titles & Explanation Debit ($) Credit ($)
January 1, 2017 Cash ($100,000 * 95 %) 95,000
Discount on Bonds Payable 5,000
Bonds Payable 100,000
(To record the issuance of the bonds)
June 30, 2017 Interest Expense (balancing figurre) 3,250
Discount on Bonds Payable [($5,000 / 10 ) * 6/12] 250
Cash [($100,000 * 6 %) *6/12 ] 3,000
(To record interest expense)

Answer 2 : Journal Entries Bonds issued at Premium (issued at 102)

Date Accounts Titles & Explanation Debit ($) Credit ($)
January 1, 2017 Cash ($100,000 * 102 %) 102,000
Bonds Payable 100,000
Premium on Bonds Payable 2,000
(To record the issuance of the bonds)
June 30, 2017 Interest Expense (balancing figurre) 1,900
Premium on Bonds Payable [($2,000 / 10 ) * 6/12] 100
Cash [($100,000 * 4 %) *6/12 ] 2,000
(To record interest expense)

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