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Stottard Company issued 675,000 of 10 % , 10 year bonds on June 1 , 2017...

Stottard Company issued 675,000 of 10 % , 10 year bonds on June 1 , 2017 , at 103. The bonds were dated June 1, and interest is payable on June 1 and December 1 of each year. Required: 1. Record the issuance of the bonds on June 1, 2017. 2. Record the interest payment on December 1, 2017. Stottard uses the straight-line method of amortization. 3. Record the interest accrual on December 31, 2017, including amortization. 4. Record the journal entries required June 1, 2027, when the bonds mature.

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Answer #1

2.Interest payment on 1st Dec 2017=675000*10/100*103*1/2=3476250

3.Interest accrual on 31st Dec 2017=3476250*1/6=579375

Ammotization=1,01,250/120 months i.e.10 years=843.75

As on 31st Dec 2017,ammortization will be=843.75*6 months=5,062.5

4.June 2017: Debit Bank account 34,76,250

Credit Premium on Bond payable account 1,01,250

Credit Bonds payable account 33,75,000

(being bonds issued at 10% interest rate)

June 2027:

Debit Bonds payable account 33,75,000

Debit Premium on bonds payable account 1,01,250

Credit Bank account 34,76,250

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