Question

Wildhorse Company issued $408,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Wildhorse Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%.

Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. 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 related amortization on July 1, 2020.
(c)		The accrual of interest and the related amortization on December 31, 2020.

Answer 1

408000 416160 20400 20330 20327 Face Value Isssue Price (408000*1.02) Cash interest =408000* 10%*6/12 Interest Expenses=416160*9.7705%*6/12 416090*9.7705%*6/12 Amortization Schedule Interest Date Cash Paid Expense Jan 1,2020 June 1 2020 20400 20330 Dec 31 2020 20400 20327 Premium amortized Carrying Value 416160 416090 416018 70 73

Credit Date Jan 1,2020 Issue Entry 1. Record the Bond Issue General Journal Cash Premium on Bonds Payable Bonds Payable Record the issue of the Bond with Premium Debit 416160 8160 408000 Date June 1 2020 Journal entries for interest Payment Record the interest payment and amortization General Journal Debit Credit Interest Expenses 20330 Premium on Bonds Payable 70 Cash 20400 Record the interest Expense and amortization of Premium General Journal Debit Credit Interest Expenses 20327 Premium on Bonds Payable 73 Interest Payables 20400 Record the Accrual of interest Expense and amortization of Premium Date Dec 31 2020