Question

Culver Corporation sold $3,000,000, 7%, 5-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. Culver Corporation uses the straight-line method to amortize bond premium or discount.

Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2022, assuming that the bonds sold at 104. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare journal entries to record the issuance of the bonds and bond interest expense for 2022, assuming that the bonds sold at 98. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(1) Show the balance sheet presentation for the bond issue at December 31, 2022, using the 104 selling price.

(2) Show the balance sheet presentation for the bond issue at December 31, 2022, using the 98 selling price.

Answer 1

1
		Debit	Credit
Jan 1	Cash	3120000		=3000000*1.04
	Bonds payable		3000000
	Premium on Bonds payable		120000
Dec 31	Interest expense	186000
	Premium on Bonds payable	24000		=120000/5
	Interest payable		210000	=3000000*7%
2
		Debit	Credit
Jan 1	Cash	2940000		=3000000*0.98
	Discount on Bonds payable	60000
	Bonds payable		3000000
Dec 31	Interest expense	222000
	Discount on Bonds payable		12000	=60000/5
	Interest payable		210000	=3000000*7%
3
	Balance Sheet (Partial)
	December 31,2022
	Current Liabilities
	Interest payable		210000
	Long term Liabilities
	Bonds payable	3000000
	Add:Premium on Bonds payable	96000	3096000	=120000-24000
	Balance Sheet (Partial)
	December 31,2022
	Current Liabilities
	Interest payable		210000
	Long term Liabilities
	Bonds payable	3000000
	Less:Discount on Bonds payable	48000	2952000	=60000-12000