Question

Oriole Company issued $404,500 of 5-year, 5% bonds at 98 on January 1, 2020. The bonds pay interest annually.

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

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Compute the total cost of borrowing for these bonds.

Total cost of borrowing

$

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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

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Compute the total cost of borrowing for these bonds, assuming the bonds were issued at 104.

Total cost of borrowing

$

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Answer 1

Account Titles and Explanation	Debit	Credit
Cash	396410		=404500*0.98
Discount on Bonds payable	8090
Bonds payable		404500
Total interest to be paid	101125		=404500*5%*5
Add: Discount on Bonds payable	8090
Total cost of borrowing	109215

Account Titles and Explanation	Debit	Credit
Cash	420680		=404500*1.04
Bonds payable		404500
Premium on Bonds payable		16180
Total interest to be paid	101125		=404500*5%*5
Less: Premium on Bonds payable	16180
Total cost of borrowing	84945