On January 1, 2018, agricultural credit union (ACU) Issued 9%, 20-year bonds payable with face value...

On January 1, 2018, agricultural credit union (ACU) Issued 9%, 20-year bonds payable with face value of 900,000. These bonds pay interest on June 30 and December 31. The issue price of the bonds is 106. Journalize the following bond transactions.

a. Issuance of the bonds on January 1, 2018.

b. Payment of interest and amortization on June 30, 2018.

c. Payment of interest and amortization on Decemeber 31, 2018.

d. Retirement of the bond at maturity on Decemeber 31, 2037, assuming the last interest payment has already been recorded.

Solutions

Expert Solution


Par value of Bonds		900000
Stated rate of interest		9%
Cash interest paid		40500
Periods of Interest		40
Issue Price (900000*106%)		954000
Premium on Bonds		54000
Premium amortized (54000/20)		2700

Journal entries:
Date	Accounts title and explanations		Debit $	Credit $
Jan1 2018	Cash Account Dr.		954000
	Bonds payable Account			900000
	Premium on bonds payable			54000

June30 2018	Interest expense Dr.		37800
	Premium on Bonds payable Dr.		2700
	Cash account			40500

Dec31 2018	Interest expense Dr.		37800
	Premium on Bonds payable Dr.		2700
	Cash account			40500

Dec31 2037	Bonds Payable Dr.		900,000
	Cash Account			900,000

ekkarill92 answered 1 year ago

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