Question

On December 31, 2020, the Company issued $600,000 of 10 year, 6% bonds payable for $624,000,...

On December 31, 2020, the Company issued $600,000 of 10 year, 6% bonds payable for

$624,000, yielding an effective interest rate of 5.75%. Interest is payable annually on December

31st of each year. Show the entry for the issuance of the bonds, and the annual payment of

interest on December 21, 2021.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans:

Face Value : $600,000

Coupon rate : 6%

First Year Coupon : $600,000 *6% = $36,000

Issue Price : $624,000

Premium on issue : $624,000 - $600,000 = $24,000

Market rate : 5.75%

First Year Interest Expense : $624,000 *5.75% = $35,880

Journal Entry for Issue of bonds on Dec 31 2020 and interest expense on Dec 31 2021.

Date Account Title Debit Credit
31 Dec. 2020 Cash $624,000
Bonds Payable $600,000
Premium on issue of Bonds $24,000
31 Dec 2021 Interest Expense $35,880
Amortisation of Premium $120
Cash $36,000

For any query please ask in comment box, we are happy to help you. Also please don't forget to provide your valuable feedback. Thanks!

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Bonds Payable Journal Entries; Effective Interest Amortization On December 31, 2009, Kay Company issued $600,000 of...
Bonds Payable Journal Entries; Effective Interest Amortization On December 31, 2009, Kay Company issued $600,000 of five-year, 13% bonds payable for $650,798 yielding an effective interest rate of 10%. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and premium amortization (effective interest method) on June 30, 2010, and (c) the semiannual interest payment and premium amortization on December 31, 2010. Round amounts...
Bonds Payable Journal Entries; Effective Interest Amortization On December 31, 2014, Blair Company issued $600,000 of...
Bonds Payable Journal Entries; Effective Interest Amortization On December 31, 2014, Blair Company issued $600,000 of 20-year, 11 percent bonds payable for $480,015, yielding an effective interest rate of 14 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2015, and (c) the semiannual interest payment and discount amortization on December 31, 2015....
sShannon Company issued $1,000,000, 8%, 10-year bonds on December 31, 2016, for $960,000. Interest is payable...
sShannon Company issued $1,000,000, 8%, 10-year bonds on December 31, 2016, for $960,000. Interest is payable annually on December 31. Shannon uses the straight-line method to amortize bond premium or discount. (a) The issuance of the bonds. (b) The payment of interest and the discount amortization on December 31, 2017. (c) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Oriole Company issued $640,000, 10%, 10-year bonds on December 31, 2019, for $570,000. Interest is payable...
Oriole Company issued $640,000, 10%, 10-year bonds on December 31, 2019, for $570,000. Interest is payable annually on December 31. Oriole Company uses the straight-line method to amortize bond premium or discount. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2019 Prepare the journal entry to record the payment of interest and the discount...
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount...
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount on Bonds Payable 50,000 The bonds mature on 12/31/28. Straight-line amortization is used. If 60% of the bonds are retired at 104 on January 1, 2025, what is the gain or loss on early extinguishment? Answer $_______________ 2. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2030. The bonds were issued...
7.) Gareon Conley Company issued $3,000,000 of 10-year, 6% annual interest, bonds payable on March 1,...
7.) Gareon Conley Company issued $3,000,000 of 10-year, 6% annual interest, bonds payable on March 1, 2018. The bonds are dated January 1, 2018, with interest payable semi-annually every July 1 and January 1. Conley Company maintains their accounting records on a fiscal year ending July 31. The market rate of interest on similar debt instruments was also 6% so the bonds were sold at face (par) value. The journal entry to record the first interest payment on July 1,...
On January 1, 2020, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The...
On January 1, 2020, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,231, and pay interest each July 1 and January 1. JWS uses the effective-interest method. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%. No. Date Account Titles and Explanation Debit Credit (a) (b) (c)
On September 1, 2021, Bear Corporation issued $ 1,000,000, 6%, 10-year bonds. Interest is payable annually...
On September 1, 2021, Bear Corporation issued $ 1,000,000, 6%, 10-year bonds. Interest is payable annually with the first payment due on September 1, 2022. Instructions a) For each of the following market rate assumptions, identify whether Bear would issue the bonds at face value, at a discount, or at a premium:       4%.       8%. b) Provide the appropriate journal entry on September 1, 2021 to record the issuance of the bonds if the market rate of interest is...
Bonds Payable Journal Entries; Effective Interest Amortization On December 31, 2017, Kim Company issued $500,000 of...
Bonds Payable Journal Entries; Effective Interest Amortization On December 31, 2017, Kim Company issued $500,000 of five‑year, 12 percent bonds payable for $538,609, yielding an effective interest rate of ten percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and premium amortization (effective interest method) on June 30, 2018, and (c) the semiannual interest payment and premium amortization on December 31, 2018....
Harper Company issued $150,000 of 6% bonds, dated January 1, 2020 and maturing on December 31,...
Harper Company issued $150,000 of 6% bonds, dated January 1, 2020 and maturing on December 31, 2022. The company will pay interest annually, every December 31 through December 31, 2022. Harper Company chose to report the bond liability using the Fair Value Option. As a result of changes in the company's risk profile, the bond price was 101 on December 31, 2020 and 100 ½ on December 31, 2021. Below, please find an amortization table for Harper Company's bonds. Date...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT