Question

The Kingbird Company issued $360,000 of 11% bonds on January 1, 2020. The bonds are due January 1, 2025, with interest payable each July 1 and January 1. The bonds were issued at 102.

Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Kingbird Company records straight-line amortization semiannually.

(a)	choose a transaction date Jan. 1, 2020July 1, 2020Dec. 31, 2020	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
(b)	choose a transaction date Jan. 1, 2020July 1, 2020Dec. 31, 2020	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
(c)	choose a transaction date Jan. 1, 2020July 1, 2020Dec. 31, 2020	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount

Answer 1

(a)

Par value of bonds = $360,000

Issue price = 102

Cash received from issue of bonds = Par value of bonds x Issue price

= 360,000 x 102%

= $367,200

Premium on issue of bonds= Cash received from issue of bonds- Par value of bonds

= 367,200-360,000

= $7,200

Date	General Journal	Debit	Credit
January 1	Cash	$367,200
	Premium on bonds payable		$7,200
	Bonds payable		$360,000
	( To record issuance of bonds at premium)

(b)

Semi annual interest payment = Par value of bonds x Interest rate x 6/12

= 360,000 x 11% x 6/12

= $19,800

Semi annual amortization of bond premium = Bond premium / Semi annual interest payment periods

= 7,200/10

= $720

Date	General Journal	Debit	Credit
July 1	Interest expense	$19,080
	Premium on bonds payable	$720
	Cash		$19,800
	( To record semi annual interest payment)

(c)

Date	General Journal	Debit	Credit
December 31	Interest expense	$19,080
	Premium on bonds payable	$720
	Interest payable		$19,800
	( To record semi annual interest payment)

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