Question

In: Accounting

Premium Amortization On the first day of the fiscal year, a company issues an $3,800,000, 12%,...

Premium Amortization
On the first day of the fiscal year, a company issues an $3,800,000, 12%, 5-year bond that pays semiannual interest of $228,000 ($3,800,000 × 12% × ½), receiving cash of $4,093,425.
Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Interest Expense
Premium on Bonds Payable
Cash


Redemption of Bonds Payable
A $930,000 bond issue on which there is an unamortized premium of $80,000 is redeemed for $766,000.
Journalize the redemption of the bonds. If an amount box does not require an entry, leave it blank.
Bonds Payable
Premium on Bonds Payable
Gain on Redemption of Bonds
Cash


Entries for Issuing Bonds
Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $390,000 of 20-year, 11% bonds on May 1 of the current year at face value,, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.
May 1 Issued the bonds for cash at their face amount.
Nov. 1 Paid the interest on the bonds.
Dec. 31 Recorded accrued interest for two months.

Journalize the entries to record the above selected transactions for the current year.
May 1
Cash
Bonds Payable

Nov. 1
Interest Expense
Cash

Dec. 31
Interest Expense
Interest Payable

Solutions

Expert Solution

Solution 1:

Journal Entries
S. No. Particulars Debit Credit
1 Interest expense Dr $198,657.00
Premium on bond payable Dr ($293,425/10) $29,343.00
          To Cash $228,000.00
(To record interest payment and premium amortization)

Solution 2:

Journal Entries
S. No. Particulars Debit Credit
1 Bond Payable Dr $930,000.00
Premium on bond payable Dr $80,000.00
          To Gain on redemption of bonds $244,000.00
          To Cash $766,000.00
(To record redemption of bonds)

Solution 3:

Journal Entries
S. No. Particulars Debit Credit
1 Cash Dr $390,000.00
          To Bonds payable $390,000.00
(To record issue of bonds)
2 Interest expense Dr $21,450.00
          To Cash $21,450.00
(To record interest payment)
3 Interest expense Dr $7,150.00
          To Interest payable $7,150.00
(To record interest accrued)

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Discount Amortization On the first day of the fiscal year, a company issues a $1,400,000, 8%,...
Discount Amortization On the first day of the fiscal year, a company issues a $1,400,000, 8%, 4-year bond that pays semiannual interest of $56,000 ($1,400,000 × 8% × ½), receiving cash of $1,266,974. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Discount Amortization On the first day of the fiscal year, a company issues a $3,000,000, 11%,...
Discount Amortization On the first day of the fiscal year, a company issues a $3,000,000, 11%, five-year bond that pays semiannual interest of $165,000 ($3,000,000 × 11% × ½), receiving cash of $2,889,599. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash
On the first day of the fiscal year, a company issues a $8,400,000, 12%, 10-year bond...
On the first day of the fiscal year, a company issues a $8,400,000, 12%, 10-year bond that pays semiannual interest of $504,000 ($8,400,000 × 12% × ½), receiving cash of $7,115,493. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $3,200,000, 9%, 10-year bond...
On the first day of the fiscal year, a company issues a $3,200,000, 9%, 10-year bond that pays semiannual interest of $144,000 ($3,200,000 × 9% × ½), receiving cash of $2,649,441. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $2,000,000, 9%, 5-year bond...
On the first day of the fiscal year, a company issues a $2,000,000, 9%, 5-year bond that pays semiannual interest of $90,000 ($2,000,000 × 9% × ½), receiving cash of $1,922,782. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $338,000, 7%, 10-year bond...
On the first day of the fiscal year, a company issues a $338,000, 7%, 10-year bond that pays semiannual interest of $11,830 ($338,000 x 7% x 1/2), receiving cash of $354,900. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method. If an amount box does not require an entry, leave it blank. Interest Expense _____ _____ Premium on Bonds Payable ______ ______ Cash_____ ______
On the first day of the fiscal year, a company issues a $1,000,000, 10%, 5-year bond...
On the first day of the fiscal year, a company issues a $1,000,000, 10%, 5-year bond that pays semiannual interest of $50,000 ($1,000,000 × 10% × ½), receiving cash of $1,081,109. Journalize the bond issuance. If an amount box does not require an entry, leave it blank.
Calculato 2. On the first day of the fiscal year, a company issues a $952,000, 6%,...
Calculato 2. On the first day of the fiscal year, a company issues a $952,000, 6%, 10-year bond that pays semiannual interest of $28,560 ($952,000 × 6% × 1/2), receiving cash of $999,600. Required: Journalize the entry to record the first interest payment and amortization of premium using the straight-line method. Refer to the Chart of Accounts for exact wording of account titles. Journalize the entry to record the first interest payment and amortization of premium using the straight-line method...
On January 1, the first day of the fiscal year, a company issues a $1,350,000, 11%,...
On January 1, the first day of the fiscal year, a company issues a $1,350,000, 11%, five-year bond that pays semiannual interest of $74,250 ($1,350,000 x 11% x ½), receiving cash of $1,512,610. Journalize the bond issuance. Refer to the Chart of Accounts for exact wording of account titles. CHART OF ACCOUNTS- General Ledger ASSETS- 110 Cash, 111 Petty Cash, 121 Accounts Receivable, 122 Allowance for Doubtful Accounts, 126 Interest Receivable, 127 Notes Receivable, 131 Merchandise Inventory, 141 Office Supplies,...
On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven–year
On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven–year, 7% installment note to Soros Bank. The note requires annual payments of $15,772, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $5,950 and principal repayment of $9,822.Journalize the entries to record the following:a1. Issued the installment note for cash on the first day of the fiscal year.a2. Paid the first annual payment...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT