Exercise 14-4 Blue Company issued $576,000 of 10%, 20-year bonds on January 1, 2017, at 103....

Exercise 14-4

Blue Company issued $576,000 of 10%, 20-year bonds on January 1, 2017, at 103. Interest is payable semiannually on July 1 and January 1. Blue Company uses the straight-line method of amortization for bond premium or discount.

Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. 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 related amortization on July 1, 2017.
(c)		The accrual of interest and the related amortization on December 31, 2017.

Solutions

Expert Solution

Transaction	Description	Debit	Credit
jan 1 2017	Cash	$ 5,93,280
	Premium on bonds payables		$ 17,280
	Bonds payable		$ 5,76,000
	(Issue of bonds )

01-July-17	Bond interest expense	$ 28,368
	Premium on bonds payable	$ 432
	Cash		$ 28,800
	(Interest on bond paid and Discount amortized)

31-Dec-17	Bond interest expense	$ 28,368
	Premium on bonds payable	$ 432
	Cash		$ 28,800
	(Interest on bond paid and Discount amortized)

Working


Bond issue price(576000/100 x 103)	$ 5,93,280.00
Face value	$ 5,76,000.00
Premium on bonds payables	$ 17,280.00
Number of Interest payments (20 years x 2)	40
Discount to be amortized per payment	$ 432.00
Interest on bond	$ 28,800.00

ekkarill92 answered 11 months ago

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