Woodwick Company issues 7%, five-year bonds, on December 31,
2017, with a par value of $106,000 and semiannual interest
payments.
| Semiannual Period-End | Unamortized Premium | Carrying Value | ||||||
| (0) | 12/31/2017 | $ | 8,231 | $ | 114,231 | |||
| (1) | 6/30/2018 | 7,408 | 113,408 | |||||
| (2) | 12/31/2018 | 6,585 | 112,585 | |||||
Use the above straight-line bond amortization table and prepare
journal entries for the following.
(a) The issuance of bonds on December 31, 2017.
(b) The first interest payment on June 30, 2018.
(c) The second interest payment on December 31, 2018.
a. The issuance of bonds on december 31, 2017
| Particular | Debit | Credit |
| Cash | $114, 231 | |
| Bonds payable | $106,000 | |
| Premium on bonds payable | $8,231 |
b. The first interest payment on June 30, 2018
| Particular | Debit | Credit |
| Interest expense | $2,887 | |
| Premium on bonds payable | $823 | |
| Cash | $3,710 |
Cash = $106,000*3.5% = $3,710
Premium on bonds payable =$8,231-$7,408 = $823
c. The second interest payment on december 31,2018
| Particular | Debit | Credit |
| Interest expense | $2,887 | |
| Premium on bonds payable | $823 | |
| Cash | $3,710 |
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