Question

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On January 1, 2017, Bonita Corporation issued $610,000 of 9% bonds, due in 10 years. The bonds were issued for $651,453, and pay interest each July 1 and January 1. The effective-interest rate is 8%.

Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Bonita uses the effective-interest method. (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.)

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	January 1, 2017
(b)	July 1, 2017
(c)	December 31, 2017

Answer 1

		Account Titles and Explanation	Debit	Credit
a	January 1, 2017	Cash	651453
		Bonds payable		610000
		Premium on Bonds payable		41453
b	July 1, 2017	Interest expense	26058		=651453*8%*6/12
		Premium on Bonds payable	1392
		Cash		27450	=610000*9%*6/12
c	December 31, 2017	Interest expense	26002		=(651453-1392)*8%*6/12
		Premium on Bonds payable	1448
		Interest payable		27450	=610000*9%*6/12