Question

itmore Company issued $457,000 of 5-year, 10% bonds at 97 on January 1, 2015. The bonds pay interest twice a year. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT Compute the total cost of borrowing for these bonds. Total cost of borrowing $ SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record the issuance of the bonds, assuming the bonds were issued at 104. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT Compute the total cost of borrowing for these bonds, assuming the bonds were issued at 104. Total cost of borrowing $

Answer 1

1)		Date	Particular	Debit	Credit
		January 1,2015	Cash / Bank A/c …dr	443290
			Discount on Bond Payable A/c….dr	13710
			To Bond Payable A/c		-457000
	Working
		Bond Value $ 457000 issued @ 97
		443290
		total cost of borrowing: 457000 x .10 x 5 = 228500 + discount 13710 = 242,210
			228500
2)		Date	Particular	Debit	Credit
			Cash / Bank A/c …dr	475280
			To Premium on Bond Payable A/c….dr		-18280
			To Bond Payable A/c		-457000
		Bond Value $ 457000 issued @ 104
			475280
		total cost of borrowing: 457000 x .10 x 5 = 228,500 - premium (18,280) = 210,220