Bramble Corporation sold $2,200,000, 7%, 5-year bonds on January 1, 2022. The bonds were dated January...

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Bramble Corporation sold $2,200,000, 7%, 5-year bonds on January 1, 2022. The bonds were dated January...

Bramble Corporation sold $2,200,000, 7%, 5-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. Bramble 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 97.

(2) Show the balance sheet presentation for the bond issue at December 31, 2022, using the 105 selling price.

(3) Show the balance sheet presentation for the bond issue at December 31, 2022, using the 97 selling price.

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Answer 1

Answer #1

1) Journal entry

date	account and explanation	Debit	Credit
Jan 1	Cash (2200000*.97)	2134000
	Discount on bonds payable	66000
	Bonds payable		2200000

Dec 31	Interest expense	167200
	Discount on bonds payable (66000/5)		13200
	Interest payable (2200000*7%)		154000

b) Balance sheet

Current liabilities
Interest payable		154000
Long term liabilities
Bonds payable	2200000
Add: Premium on bonds payable	88000	2288000

c) Balance sheet

Current liabilities
Interest payable		154000
Long term liabilities
Bonds payable	2200000
Less: Discount on bonds payable	-52800	2147200

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Answer 2

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