Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co. On...

Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co.

On April 1, 2016, Quirk issued $2,000,000, 9% bonds for $2,151,472 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2026. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date Account Titles and Explanation Debit Credit

April 1

On July 1, 2018 Quirk retired $600,000 of the bonds at 102 plus accrued interest. Quirk uses straight-line amortization. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation Debit Credit

(To record interest and premium on bonds)

(To record entry for retirement of bonds)

Expert Solution

	Account Tites and Explaination	Debit	Credit
(a)	Cash	$ 21,51,472
	Bonds Payable		$ 20,00,000
	Interest Expense ($20,00,000 X 9% X 3/12)		$ 45,000
	Premium on bonds payable (Bal. Fig.)		$ 1,06,472

	Note: Interest for 3 months is taken fo Jan to March

(b)	Interest Expense (Bal. Fig.)	$ 25,362
	Premium on bonds payable [$1,06,472 X ($6,00,000/$20,00,000) X (6/117)]	$ 1,638
	Cash ($6,00,000 X 9% X 6/12)		$ 27,000

	Note: From April 1, 2016 to January 1,2026 = 117 months ; From April 2018 to July 2018 = 6 m onths

	Bonds Payable	$ 6,00,000
	Premium on bonds payable [$1,06,472 X ($6,00,000/$20,00,000) X (90/117)]	$ 24,570
	Cash ($6,00,000 X 1.02)		$ 6,12,000
	Gain on redemption of bonds (Bal. Fig.)		$ 12,570

	Note: From July 1, 2018 to January 1,2026 = 90 months

ekkarill92 answered 2 years ago

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