Question

Blue Company issued $432,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. Blue Company uses the straight-line method of amortization for bond premium or discount.

Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a)		The issuance of the bonds.
(b)		The payment of interest and the related amortization on July 1, 2020.
(c)		The accrual of interest and the related amortization on December 31, 2020.

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
7/1/20	enter an account title for the journal entry on July 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on July 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on July 1	enter a debit amount	enter a credit amount
12/31/20	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount

Answer 1

Answer

--Journal entries

Date	Accounts title	Debit	Credit
01-Jan-20	Cash ($432000 x 103/100)	$444,960
	Premium on Bonds Payable		$12,960
	Bonds Payable		$432,000
	(to record issuance of bond)
01-Jul-20	Interest Expense	$21,276
	Premium on Bonds Payable ($ 12960 / 40 semi annual payments)	$324
	Cash ($432000 x 10% x 6/12)		$21,600
	(to record interest payment)
31-Dec-20	Interest Expense	$21,276
	Premium on Bonds Payable ($ 12960 / 40 semi annual payments)	$324
	Interest Payable		$21,600
	(to record interest accrual)