Question

On January 1, 2019, Wildhorse Co. issued $2,360,000 face value, 7%, 10-year bonds at $2,201,642. This price resulted in an effective-interest rate of 8% on the bonds. Wildhorse uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest on January 1.

Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2019

Prepare an amortization table through December 31, 2021 (three interest periods), for this bond issue. (Round answers to 0 decimal places, e.g. 15,250.) Wildhorse Co. Bond Discount Amortization Effective-Interest Method—Annual Interest Payments Annual Interest Periods Interest to Be Paid Interest Expense to Be Recorded Discount Amortization Unamortized Discount Bond Carrying Value Issue date $ $ 1 $ $ $ 2 3

Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2019. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2019

Prepare the journal entry to record the payment of interest on January 1, 2020. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020

Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2020. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020

Answer 1

Solution 1:

Journal Entries - Wildhorse Co.
Date	Particulars	Debit	Credit
1-Jan-19	Cash Dr	$2,201,642.00
	Discount on bond payable	$158,358.00
	To Bond Payable		$2,360,000.00
	(To record bond issue)

Solution 2:

Wildhorse Co.
Bond Premium Amortization
Annual interest period	Interest to be paid	Interest expense to be recorded	Discount amortization	Unamortized Discount	Bond Carrying amount
Issue Date				$158,358	$2,201,642
1	$165,200	$176,131	$10,931	$147,427	$2,212,573
2	$165,200	$177,006	$11,806	$135,621	$2,224,379
3	$165,200	$177,950	$12,750	$122,870	$2,237,130

Solution 3:

Journal Entries - Wildhorse Co.
Date	Particulars	Debit	Credit
31-Dec-19	Interest expense Dr	$176,131.00
	To Interest Payable		$165,200.00
	To discount on bond payable		$10,931.00
	(To record interest expense accrued)

Solution 4:

Journal Entries - Wildhorse Co.
Date	Particulars	Debit	Credit
1-Jan-20	interest payable Dr	$165,200.00
	To Cash		$165,200.00
	(To record interest payment)

Solution 5:

Journal Entries - Wildhorse Co.
Date	Particulars	Debit	Credit
31-Dec-20	Interest expense Dr	$177,006.00
	To Interest Payable		$165,200.00
	To discount on bond payable		$11,806.00
	(To record interest expense accrued)