Question

1. Know the following Journal entries:

1. The entry to record the issuance of 600 shares of $5 par value common stock for $15.
2. Common stock is issued for 100, and par value is 90
3. A corporation paid $105,000 to retire bonds with a face value of $98,000 and an unamortized premium balance of $3,000.
4. Know the dates for cash dividends and the journal entries for each
5. Purchase and sell of treasury stock
6. Bonds payable has a balance of $1,000,000 and a discount on bonds payable of 15,500.  The issuing corporation redeems the bonds at 99.
7. Bonds with a face value of $100,000 were issued at 102.
8. Bonds with a face value of $90,000 were issued at 97.
9. Payment of bond interest and amortization of premium semiannually
10. Payment of bond interest and amortization of discount semiannually

Answer 1

Let's first know about the Journal entry. What is a Journal entry? Well, transactions are first entered in the journal book to show which accounts should be debited and which credited. Journal is also called a subsidiary book. Recording of transactions in a journal is termed as journalizing the entries.

All transactions are first recorded in the journal as and when they occur; the record is chronological; otherwise it would be difficult to maintain the record in an orderly manner.

The journal entries are as follows:

1. The entry to record the issuance of 600 shares of $5 par value common stock for $15.

Here, the cash account will be debited with the amount of $9,000 whereas the common stock account will be credited by $3000 and remaining $6000 will be credited as a Paid-In capital in Excess of Par - Common Stock.

1. Common stock is issued for 100, and par value is 90.

Again, cash account will be debited by 100 where as the common stock will be credited by 90 remaining 10 will be credited as a Paid-In capital in Excess of Par - Common Stock.

1. A corporation paid $105,000 to retire bonds with a face value of $98,000 and an unamortised premium balance of $3000.

[Unamortized bond premium is the net difference in the price that a bond issuer sells securities less the bonds' actual face value at maturity. Unamortized bond premium is a liability for issuers as they have not yet written off this interest expense, but will eventually come due.]

Therefore, in the journal entry, bonds payable will be debited with a face value of $98,000 and premium on bonds payable will be debited by $7,000; and a cash account will be credited by $102,000 whereas an unamortized bond premium will be credited with $3,000.

1. Know the dates for cash dividend and the journal entries for each.

The dividend is paid out of the company's earnings to the investors. There are 4 key dates keep in mind holding a dividend- paying stock:

1. Declaration date: the declaration date is the date on which the board of directors announces and approves the payment of a dividend. The declarations include the amount of dividend being paid and basis record date and the payment date.

The announcement of declaration date involves the decision making activity by the board of directors of the company and no cash flow to or from the company. Thus, it does not require to record any journal entry.

1. Ex-dividend date: the ex dividend date is the first day that a stock traded without a dividend. The company does not set the ex dividend date it is set by the stock exchange where the company's stock is traded. It is also a decision making process which is done by the stock exchange and which also does not require to record any journal entry.
2. Record date: the record date is the date on which the investor must be on the company's books in order to receive a dividend. The company records its Liability towards the investor for the payment of dividend and hence, passes the journal entry as investor account credited and dividend payable account debited by the amount of dividend as stipulated and announced by the the board of directors on the declaration date.
3. Payment date: a payment date is the date on which the dividend is paid to shareholders.dividend payment may be either made or electronically transferred to the accounts of shareholders. On the payment date the general entry needs to be recorded as the investor account debited and cash account will be credited. Further, dividend payable accounts will be credited and income statement accounts will be debited.

1. Purchase and sell of treasury stocks

For the purchase of treasury stock treasury stock will be debited and the cash account will be credited. Whereas the journal entry for sale of treasury stock, cash account debited and the treasury account it will be credited.

1. Bonds payable has a balance of $1,000,000 and a discount on bonds payable of 15,500. The issuing corporation redeems the bonds at 99.

The journal entry for the redemption of bonds - bond payable will be debited $1,000,000 and premium on bond payable will be debited by $5,500; and cash account will be debited by $990,000 and game on redemption of bond payable will be debited by $10,000.

1. Bonds with a face value of $100,000 were issued at 102.

The journal entry for the issuance of bond will be a cash account debited by $102,000 whereas bond payable will be credited by $100,000 and premium on bond payable will be credited with $2,000.

1. Bonds with a face value of $90,000 were issued at 97.

Cash account will be debited with $87,300 and loss on issue of bond payable will be debited with $2,700 whereas the bond payable account will be credited with $90,000

1. Payment of bond interest and amortization of premium semiannually.

The journal entry for the payment of bond interest and amortization of premium - interest expenses debited, premium on bonds payable debited and cash account will be credited.

1. Payment of bond interest and amortization of discount semiannually

The journal entry for the payment of a bond interest and the amortization of discount - interest expense debited; discount on bonds payable will be credited and the cash account will be credited.