Question

Sheffield Corporation sold $2,850,000, 6%, 5-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. Sheffield Corporation uses the straight-line method to amortize bond premium or discount.

------------------------------------------------------------------------------------------------------------------------------------------

(1.) Prepare journal entries to record the issuance of the bonds and bond interest expense for 2022, assuming that the bonds sold at 95

Account Titles and Explanation Debit Credit Date Jan. 1 2764500 Cash Discount on Bonds Payable Bonds Payable Dec. 31 Interest Expense Discount on Bonds Payable Interest Payable

(2.) Show the balance sheet presentation for the bond issue at December 31, 2022, using the 107 selling price.

(3.) Show the balance sheet presentation for the bond issue at December 31, 2022, using the 95 selling price.

Answer 1

1
Cash	2707500		=2850000*0.95
Discount on Bonds payable	142500
Bonds payable		2850000
Interest expense	199500
Discount on Bonds payable		28500	=142500/5
Interest payable		171000	=2850000*6%
2
Balance Sheet (Partial)
December 31,2022
Current Liabilities		171000
Interest payable
Non-Current Liabilities
Bonds payable	2850000
Add: Premium on Bonds payable	159600	3009600
3
Balance Sheet (Partial)
December 31,2022
Current Liabilities		171000
Interest payable
Non-Current Liabilities
Bonds payable	2850000
Less: Discount on Bonds payable	114000	2736000
Workings:
2
Premium on Bonds payable	199500	=2850000*0.07
Premium amortized	39900	=199500/5
Premium unamortized	159600	=199500-39900
3
Discount on Bonds payable	142500
Discount unamortized	114000	=142500-28500