Question

# Stephanie Ram Corporation have a \$880,000 "bond issue" dated February 1, 2016 due in 10 years...

Stephanie Ram Corporation have a \$880,000 "bond issue" dated February 1, 2016 due in 10 years with an annual interest rate of 6%. Interest is payable February 1 and August 1. On April 1, 2016, the bond was sold for \$838,700 plus accrued interest.

Using the straight-line method, prepare the general journal entries for each of the following and show your work in detail:

a)The issuance of the bond on April 1, 2016.

b)Payment of the semi-annual interest and the amortization of the discount on August 1, 2016.

c)Accrual of the interest and the amortization of the discount on December 31, 2016.

d)Payment of the semi-annual interest and the amortization of the discount on February 1, 2017.

 Date Accounts Debit Credit April 1, 2016 Cash (838700+8800) \$847,500 Discount on Bonds payable (880000-838700) \$41,300 Bonds payable \$880,000 Interest payable (880000*6%*2/12) \$8,800 August 1, 2016 Interest expense 19665 Interest payable 8800 Discount on Bonds payable (41300/20) 2065 Cash (880000*6%*6/12) 26400 December 31, 2016 Interest expense 23721 Discount on Bonds payable (41300/20)*5/6) 1721 Interest payable  (880000*6%*5/12) 22000 February 1, 2017 Interest expense 4744 Interest payable 22000 Discount on Bonds payable (41300/20)*1/6) 344 Cash (880000*6%*6/12) 26400

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