Question

# On January 1, 2020, Ivanhoe Corporation issued \$560,000 of 7% bonds, due in 10 years. The...

On January 1, 2020, Ivanhoe Corporation issued \$560,000 of 7% bonds, due in 10 years. The bonds were issued for \$521,948, and pay interest each July 1 and January 1. Ivanhoe 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%.

(a)
 Jan. 1, 2020July 1, 2020Dec. 31, 2020
(b)

Jan. 1, 2020July 1, 2020Dec. 31, 2020

(c)

Jan. 1, 2020July 1, 2020Dec. 31, 2020

 Date Account Titles Debit Credit a Jan. 1, 2020 Cash 521948 Discount on Bonds payable 38052 Bonds payable 560000 b July 1, 2020 Interest expense 20878 =521948*8%*6/12 Discount on Bonds payable 1278 Cash 19600 =560000*7%*6/12 c Dec. 31, 2020 Interest expense 20929 =(521948+1278)*8%*6/12 Discount on Bonds payable 1329 Interest payable 19600 =560000*7%*6/12

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