Question

Swanson Corporation issued $8,500,000 of 20-year, 8 percent bonds on April 1, 2013, at 102. Interest is due on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2033. Swanson's financial year ends on December 31. Prepare the following journal entries:

a.	Prepare the journal entry at April 1, 2013, to record the issuance of the bonds. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Apr. 1, 2013	(Click to select)Accounts receivableBond payableSalesPremium on bonds payableBond interest payableBond interest expenseAccounts payableCash
	(Click to select)Bond interest payableCashAccounts receivableAccounts payablePremium on bonds payable Bond payable Bond interest expenseSales
	(Click to select)Premium on bonds payable Accounts receivableBond interest payableBond interest expenseAccounts payableSalesCashBond payable

b.	Prepare the journal entry at September 30, 2013, to pay interest and to amortize the bond premium. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Sept. 30, 2013	(Click to select)Bond payable SalesBond interest payableAccounts receivableAccounts payableCashPremium on bonds payable Bond interest expense
	(Click to select)CashSalesPremium on bonds payable Bond payable Accounts receivableBond interest payableAccounts payableBond interest expense
	(Click to select)Accounts payableBond interest expenseSalesBond PayableBond interest payablePremium on bonds payableAccounts receivableCash

c.	Prepare the journal entry at March 31, 2033, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Mar. 31, 2033	(Click to select)Accounts payableCashBond interest expenseBond payableSalesPremium on bonds payable Bond interest payableAccounts receivable
	(Click to select)Accounts payableBond interest payableSalesCashBond payableBond interest expenseAccounts receivablePremium on bonds payable
	(Click to select)Premium on bonds payable Accounts payableSalesBond interest expenseCashBond interest payableAccounts receivableBond payable
	(Click to select)Accounts payableBond payableBond interest expenseSalesPremium on bonds payableCashAccounts receivableBond interest payable
Mar. 31, 2033	(Click to select)Accounts payableCashBonds payableBond interest payableBond interest expenseSalesAccounts receivablePremium on bonds payable
	(Click to select)SalesCashBonds PayableAccounts receivableBond interest expenseBond interest payablePremium on bonds payableAccounts payable

Answer 1

Requirement a:

Date	General Journal	Debit	Credit
Apr 1,2013	Cash [$8,500,000 x 1.02]	$8,670,000
	Bonds payable [Face value]		$8,500,000
	Premium on bonds payable		$170,000
	[To record issuance of bonds payable]

Requirement b:

Date	General Journal	Debit	Credit
Sept 30,2013	Interest expense	$329,375
	Premium on bonds payable [$170,000/16 periods]	$10,625
	Cash [$8,500,000 x 8% x (6/12)]		$340,000
	[To record payment of interest]

Requirement c:

Date	General Journal	Debit	Credit
Mar 31,2033	Interest expense	$329,375
	Premium on bonds payable [$170,000/16 periods]	$10,625
	Cash [$8,500,000 x 8% x (6/12)]		$340,000
	[To record payment of interest]
Mar 31,2033	Bonds payable	$8,500,000
	Cash		$8,500,000
	[To record redemption of bonds at maturity]