Question

E14-4 (Entries for Bond Transactions—Straight-Line) Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of amortization for bond premium or discount. Instructions Prepare the journal entries to record the following. (a) The issuance of the bonds. (b) The payment of interest and the related amortization on July 1, 2014. (c) The accrual of interest and the related amortization on December 31, 2014

Please explain answers

Answer 1

	E14-4
	Date	Account title and explanation	Debit	Credit
(a)	jan 1 2014	Cash A/c ( 600,000/100*102)	$612,000		(face value of bond was $100 and it was issued at $102)
		Premium on bond payable		$12,000
		Bond payable		$600,000
		(Bond issued at premium)
(b)	July 1 2014	Bond interest expense	$29,700		(30,000 interest - 300 amortization)
		Premium on bond payable	$300		(12,000/40), 20 years = 40 half years
		Cash A/c		$30,000	(600000*10%*6/12)
		( To record period interest payment and premium amortization.)
('c)	Dec 31 2014	Bond interest expense	$29,700		(30,000 interest - 300 amortization)
		Premium on bond payable	$300		(12,000/40), 20 years = 40 half years
		Bond interest payable A/c		$30,000	(600000*10%*6/12)
		( To record period interest accrual and premium amortization.)