Question

Woodwick Company issues 7%, five-year bonds, on December 31, 2016, with a par value of $94,000...

Woodwick Company issues 7%, five-year bonds, on December 31, 2016, with a par value of $94,000 and semiannual interest payments.

Semiannual Period-End Unamortized Premium Carrying Value
(0) 12/31/2016 $ 7,991 $ 101,991
(1) 6/30/2017 7,192 101,192
(2) 12/31/2017 6,393 100,393


Use the above straight-line bond amortization table and prepare journal entries for the following.

  1. (a) The issuance of bonds on December 31, 2016.
  2. (b) The first interest payment on June 30, 2017.
  3. (c) The second interest payment on December 31, 2017.
  • 1

    Record the issue of bonds with a par value of $94,000 cash on December 31, 2016.

  • 2

    Record the first interest payment on June 30, 2017.

  • 3

    Record the second interest payment on December 31, 2017.

Homework Answers

Answer #1

Answer :

Date General Journal Debit Credut
(a) December 31, 2016 Cash 101,991
Premium on bonds payable 7,991
Bonds payable 94,000
(To record issuance of bonds)
(b) June 30, 2017 Bonds interest expense 2,491
Premium on bonds payable 799
Cash 3,290
(To record interest payment)
(c) December 31, 2017 Bonds interest expense 2,491
Premium on bonds payable 799
Cash 3,290
(To record interest payment)

Working :

Premium on bonds payable for June 30, 2017 = $7,991 - $7,192 = $799

Premium on bonds payable for December, 2017 = $7,192 - $6,393 = $799

Bonds interest expense for June 30, 2017 & December, 2017 = ($94,000 * 7 % * 6/12) - $799 = $2,491

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