Question

Alpha Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal year 2016 Alpha had the following bond payable transactions: January 2, issued ten, $1,000 bonds at 101 1/2. These 5-year bonds are dated January 1, 2016. The contract interest rate is 6%.  Interest is payable semi-annual on January 1 and July 1. July 1, Alpha issued $500,000 of 10%, 10-year bonds.  The bonds are dated January 1, 2016 were issued at 98 1/2, and pay interest on July 1 and January 1. June 30, Alpha issued 10-year bonds $10,000 face value bonds at 104. The bonds have a stated rate of 8%. Interest is payable on June 30 and December 31. Use this information to prepare General Journal entries, without explanations, for the three bonds issued and any interest accruals and payments for the fiscal year 2016. Three 12/31/16 transaction dates are provided for the fiscal year accruals. One for each individual bond issue. (Round all calculations to nearest whole dollar.)

Answer 1

Date	Accounting description		Debit	Credit
Jan-02	Cash		1025
	TO bonds payable			1000
	To premium on bonds payable			25
	(being bonds are issued at premium )
Jul-01	Cash		49250
	Discount on bonds payable		750
	TO bonds payable			50000
	(Being Bonds are issued at a discount price)
Jul-01	Interest expense		27.5
	Premium on bonds payable		2.5
	To cash			30
	(Being interest recorded)
Oct-01	Cash		10400
	To bonds payable			10000
	TO premium on bonds payable			400
	(Being bonds issued at premium)
31-Dec	Interest expense		27.5
	Premium on bonds payable		2.5
	To accrued interest payab;e			30
	(Being accrued interest recorded)
31-Dec	Interest expense		2787.5
	To Accrued interest payable			2500
	To discount on bonds payable			287.5
31-Dec	Interest expense		178.5
	Premium on bonds payable		21.5
	To accrued interest payab;e			200
	(Being accrued interest recorded)