Question

Blossom Company issued $466,500, 7%, 15-year bonds on December 31, 2016, for $447,840. Interest is payable annually on December 31. Blossom uses the straight-line method to amortize bond premium or discount.

Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a)		The issuance of the bonds.
(b)		The payment of interest and the discount amortization on December 31, 2017.
(c)		The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

solution:

NO	DATE	ACCOUT TITLES	DEBIT	CREDIT
A	DEC 31, 2016	CASH	447840
		DISCOUT ON BONDS PAYABLE	18660
		BONDS PAYABLE		466500
		(TO RECORD ISSUUANCE OF 7% BONDS)
B.	DEC31,2017	INTEREST EXPENSE	33899
		DISCOUNT ON BONDS PAYABLE	32655
		(TO RECORD INTEREST EXPENSE AND AMORIZATION FOR THE YEAR)
C.	DEC 31, 2031	BONDS PAYABLE	466500
		CASH		466500
		(TO REORD REDEMPTION OF BONDS)

IN THE TABLE WE Got 2031 because 15years maturity from 2016 is 2031

EXPLANATION:

a. The distinction between the issue cost and the assumed worth is treated as rebate on issue of bonds

b. Since the organization pursues straight line strategy, the all out rebate determined to a limited extent an is separated by the life of the security, for example 15 years to land at the yearly amortization sum. This is added to the intrigue cost notwithstanding the 7%

c. The whole assumed worth is reimbursed at development

THANK YOU.