Question

Sandhill Co. issued $ 600,000, 10-year, 8% bonds at 105. 1.Prepare the journal entry to record...

Sandhill Co. issued $ 600,000, 10-year, 8% bonds at 105.

1.Prepare the journal entry to record the sale of these bonds on January 1, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

2.Suppose the remaining Premium on Bonds Payable was $ 18,000 on December 31, 2020. Show the balance sheet presentation on this date.

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Answer #1

Amount received in issue of bonds on 1st Jan 2017 = 600000 X 1.05 = $630,000

Amount of premium recoved = $630,000-$600,000= $30,000

1. Journal Entry to record sale of Bonds on 1st Jan 2017 :

Bank A/c Dr $630,000

Bonds Payable Cr $600,000

Bonds Premium Payable Cr $30,000

(Issue of 8% bonds at premium)

2.Balance Sheet presentation as on Dec 31, 2020 (assuming interest for 2020 is outstanding and payment is done annually):

Liabilities :

Bond Payable $600,000

Premium Payable $18,000

Interest Payable $48,000

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