In: Accounting
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 $100,000 par value, mature in 10 years, and pay 4% interest semiannually on June 30 and December 31. The bonds were issued at 102.
Prepare the journal entry to record the issuance of the bonds on January 1, 2017.
Prepare the journal entry to record the first interest payment on June 30, 2017, assuming that the bond discount or premium is amortized using the straight-line method.
Answer 1 : Journal Entries Bonds issued at discount (issued at 95)
Date | Accounts Titles & Explanation | Debit ($) | 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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