Sage 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. Sage 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. |
Answer:
Date | Accounts title and explanations | Debit $ | Credit $ |
01.01.20 | Cash (4320*103) | 4,44,960 | |
Bonds payable(4320*100) | 4,32,000 | ||
Premium on bonds payable(4,320*3) | 12,960 | ||
(To record For bonds issued at par value) | |||
01.07.20 | Interest expenses(21600-324) | 21,276 | |
Premium on bonds payable($12,960/20)*1/2 | 324 | ||
Cash (4320000*10%*6/12) | 21,600 | ||
(To record For interest paid) | |||
31.12.20 | Interest expenses | 21,276 | |
Premium on bonds payable | 324 | ||
Interest payable | 21,600 | ||
(To record For interest accrued) |
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