Question

On January 1, 2015, Shea Company issues 700 bonds, 15 years (1000 par value bonds at 97) with a coupon rate of 6% and maturing in 2030. The straight line method is used to amortize any bond discount or premium on a semi-annual basis. Be sure to label the discount or premium as: discount on bonds within long-term liability or premium on bonds within long-term liability (the discount r premium in the system relates to the sale of inventory and does not apply here). Also label to cash inflow and outflows from the bonds including interest payments as: Cash, Bonds- within the bank and checking account. Do not forget the journals required every six months.

Two years later, on January 1, 2017, Shea retires 20% of these bonds by buying them on the open market at 104 (or $1040 a bond). All interest and amortization is accounted for by two separate journal entries for each and paid through December 31, 2016, the day before the purchase is to occur. Purchase these bonds with Cash, Bonds within the bank and checking account

Required:

In QuickBooks™, provide the journal entry at January 1, 2015 for the issuance of the 700 bonds.

In QuickBooks™, provide the entries for interest expense and amortization expense up to December 31, 2016.

In QuickBooks™, provide the journal entry which retires 20% (140 bonds) of the bond in the public market.

Go to Company widget, select settings and then chart of accounts. Select Cash, bonds and Bonds, Liability registers. Click on each and you will see the transactions you made in each register. Copy and paste (or export) each to word document being sure two columns of number show and submit to the assignment area.

Answer 1

Answer:

Journal entries
date	Account and explanation	Debit	Credit
Jan 1 2015	Cash inflow(700*10000)97%	679,000
	Bond payable(long term liability)		700,000
	Bond discount	21000
	To record the issuance of bond payable
30-Jun	Interest expense	583	583
2015	Amortization of discount (21000/36)
	(to amortise discount)
31-Dec	Interest expense	583
2015	Amortization of discount (21000/36)		583
	(to amortise discount)
Dec 31 2015	Interest expense (700000*6%)	42000
	Cash outflow		42000
	(to record the payment of interest
Jun 30 2016	Interest expense	583
	Amortization of discount (21000/36)		583
	(to amortise discount)
Dec 31 2016	Interest expense	583
	Amortization of discount (21000/36)		583
	(to amortise discount)
Dec 31 2016	Interest expense (700000*6%)	42000
	Cash outflow		42000
	(to record the payment of interest
1-Jan	Bond payable(140*1000)	140,000
2017	Loss on retirement of bonds	5,833
	Discount on bonds[(140*1000)*3%]-(42000/36)*2years		233
	Cash 140*1040		145,600
To record the retirement of bond