Question

On January 1 2017, Headland Company sold 12% bonds having a maturity value of $ 410,000 for $. 441,084, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2017, and mature January 1 2022 with interest payable December 31 of each year. Headland Company allocates interest and unamortized discount or premium on the effective-interest basis. Prepare the journal entry at the date of the bond issuance. (Round answer to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1,2017 Cash 441,084 Bonds Payable 410,000 Premium on Bonds Payable 31094 eTextbook and Media List of Accounts Prepare a schedule of interest expense and bond amortization for 2017-2019. (Round answer to 0 decimal places, e.g. 38,548.) Schedule of Interest Expense and Bond Premium Amortization Effective-Interest Method Interest Expense Premium Cash Paid Carrying Amount of Bonds Date 441,084 12/31/17 12/31/18 12/31/19

Answer 1

Journal entry

Date	account and explanation	debit	credit
Jan 1,2017	cash	441084
	Bonds payable		410000
	Premium on bonds payable		31084
	(To record bond issue)

Schedule

Date	Cash paid	Interest expense	Premium amortized	Carrying value
1/1/2017				441084
31/12/2017	410000*12% = 49200	441084*10% = 44108	5092	435992
31/12/2018	49200	435992*10% = 43599	5601	430391
31/12/2019	49200	430391*10% = 43039	6161	424230

Journal entry

Date	account and explanation	debit	credit
31/12/17	Interest expense	44108
	Premium on bonds payable	5092
	Cash		49200
	(to record interest)
31/12/19	Interest expense	43039
	Premium on bonds payable	6161
	cash		49200
	(To record interest)