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Coates Inc. issues $3 million,5-year,10% bonds at 102, with interest payable on July 1 and January...

Coates Inc. issues $3 million,5-year,10% bonds at 102, with interest payable on July 1 and January 1. The straight-line method is used to amortize bond premium. (a) Prepare the journal entry to record the sale of these bonds on January 1,2010. (b) Prepare the journal entry to record interest expense and bond premium amortization on July 1,2010, assuming no previous accrual of interest. Put the process.

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Answer #1
JOURNAL ENTRY IN THE BOOKS OF COATES INC.
DR. CR.
DATE PARTICULARS AMOUNT AMOUNT
JAN 1, 2010 CASH / BANK A/C               DR. 3060000
   TO 10 % BONDS 3000000 30000 60000
   TO PREMIUM ON ISSUE OF BONDS 60000 3000000 3060000
BEING 30000 BONDS @100 WITH 2$
PREMIUM)
JULY 1,2020 INTEREST EXPENSE 144000 300000 150000
PREMIUM ON ISSUE OF BONDS 6000 AMORTISATION 12000
   TO CASH 150000 6000
(BEING 60000 PREMIUM AMORTISED
INTO 5 YEARS AND THEN DIVIDED
HALF YEARLY)
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