Question

Woodwick Company issues 7%, five-year bonds, on December 31, 2017, with a par value of $106,000...

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.

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Answer #1

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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