Question

On October 1, 2016, Ball Company issued 10% bonds dated October 1, 2016, with a face amount of $350,000. The bonds mature in 8 years. Interest is paid semiannually on March 31 and September 30. The proceeds from the bond issuance were $355,751.07 to yield 9.70%. Ball Company has a December 31 fiscal year-end and does not use reversing entries.

Required:

1.	Prepare journal entries to record the issuance of the bonds and the interest payments for 2016 and 2017 using the effective interest method.
2.	Prepare journal entries to record the issuance of the bonds and the interest payments for 2016 and 2017 using the straight-line method.

Prepare journal entries to record the issuance of the bonds and the interest payments for 2016 and 2017 using the effective interest method. Additional Instructions

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GENERAL JOURNAL

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Prepare journal entries to record the issuance of the bonds and the interest payments for 2016 and 2017 using the straight-line method. Additional Instructions

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GENERAL JOURNAL

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Answer 1

Effective interest method
DATE	ACCOUNT TITLE	POST REF.	DEBIT	CREDIT
Oct 1, 2016	Cash		$355,751.07
	Bonds Payable			$350,000.00
	Premium on Bonds Payable			$5,751.07
Dec 31, 2016	Interest Expense		$8,626.96
	Premium on Bonds Payable		$123.04
	Interest Payable			$8,750.00
Mar 31, 2017	Interest Payable		$8,750.00
	Interest Expense		$8,626.96
	Premium on Bonds Payable		$123.04
	Cash			$17,500.00
Sep 30, 2017	Interest Expense		$17,241.99
	Premium on Bonds Payable		$258.01
	Cash			$17,500.00
Straight-line method
DATE	ACCOUNT TITLE	POST REF.	DEBIT	CREDIT
Oct 1, 2016	Cash		$355,751.07
	Bonds Payable			$350,000.00
	Premium on Bonds Payable			$5,751.07
Dec 31, 2016	Interest Expense		$8,570.28
	Premium on Bonds Payable		$179.72
	Interest Payable			$8,750.00
Mar 31, 2017	Interest Payable		$8,750.00
	Interest Expense		$8,570.28
	Premium on Bonds Payable		$179.72
	Cash			$17,500.00
Sep 30, 2017	Interest Expense		$17,140.56
	Premium on Bonds Payable		$359.44
	Cash			$17,500.00