Question

On January​ 1, 2018​, Noah Unlimited issues 12​%, 20​-year bonds payable with a face value of $180,000.

The bonds are issued at 103 and pay interest on June 30 and December 3. ​(Assume bonds payable are amortized using the​ straight-line amortization​ method.)

1.	Journalize the issuance of the bonds on January​ 1, 2018.
2.	Journalize the semiannual interest payment and amortization of bond premium on June​ 30, 2018.
3.	Journalize the semiannual interest payment and amortization of bond premium on December​ 31, 2018.
4.	Journalize the retirement of the bond at​ maturity, assuming the last interest payment has already been recorded.​ (Give the​ date.)

Answer 1

Date	Particulars		Debit	Credit
January 1, 2018	Cash		185,400.00
	Bonds Payable			180,000.00
	Premium payable on bonds			5,400.00
	To record the issue of bonds at premium
June 30, 2018	Premium Payable on Bonds		270.00
	Bond Interest Expense		21,330.00
	Cash			21,600.00
	To interest Expense of bonds
December 31, 2018	Premium Payable on Bonds		270.00
	Bond Interest Expense		21,330.00
	Cash			21,600.00
	To interest Expense of bonds
December 31, 2037	Bonds Payable		180,000.00
	Cash			180,000.00
	To repay the bonds issued on 01-Jan-2018 and interest paid earlier

Note: Entries relating to Interest Expense payable and payment of such interest for the 20th Year i.e., on 31-Dec-2037 have not been shown here because it is assumed that those entries have been recorded as per the details given in the question.

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