Question

On 01-01-15, B issued $3,000,000 of 4%, 10-year term bonds. The bonds pay interest every July 1 and January 1. At the time B issued the bonds, similar bonds paid 4.5%. Upon issuing the bonds, B incurred and paid $30,000 of bond issuance costs. B uses the effective-interest method to amortize any bond discount or premium. B only prepares AJEs every December 31. Prepare the entries B should make on:

01-01-15

07-01-15

12-31-15

01-01-16

Answer 1

SOLUTION

Given data

given that the On 01-01-15,B issued $3000,000 of 4%, 10years term bond

then the bond pay the interest every july 1 and january 1

given that at the time B issued the bonds, similar bonds paid 4.5% upon issuing the bonds ,B incurred and and paid $30,000 of bond issuance costs

A.
4%Bond A/c Dr $300000
To Cash/Bank A/c $300000
(Being Bond Issue)

B.
Interest Exp. A/c Dr $12000
To Cash/Bank A/c $12000
(Being Interest Paid)

C.
No Entries

D.
Interest Exp. A/c Dr $12000
To Cash/Bank A/c $12000
(Being Interest Paid)