Entries for Bonds Payable. Prepare journal entries to record the following transactions related to long-term bonds...

Entries for Bonds Payable.

Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co. (a) On April 1, 2016, Quirk issued $2,000,000, 9% bonds for $2,151,472 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2026. (b) On July 1, 2018 Quirk retired $600,000 of the bonds at 102 plus accrued interest. Quirk uses straight-line amortization.

Expert Solution

	Date	Account Titles and Explanation	Debit	Credit
(a)	Apr. 1, 2016	Cash	2151472
		Premium on bonds payable		106472
		Interest payable ($2000000 x 9% x 3/12)		45000
		Bonds payable		2000000
		(To record issue of bonds including interest accrued)
(b)	Jul. 1, 2018	Interest expense	25403
		Premium on bonds payable ($31942 x 1/10 x 6/12)*	1597
		Interest payable ($600000 x 9% x 6/12)		27000
		(To record interest accrued and amortization of premium)
	Jul. 1, 2018	Bonds payable	600000
		Interest payable	27000
		Premium on bonds payable*	24755
		Loss on bond retirement	50245
		Cash [($600000 x 102/100) + $90000]		702000
		(To record retirement of bonds payable)

*	Premium on $600000 bond payable = ($106472 x $600000/$2000000) = $31942
	Premium amortized till Jul. 1, 2018 = $31942 x 27/120 = $7187
	Balance in premium on bonds payable = $31942 - $7187 = $24755

ekkarill92 answered 1 year ago

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