Question

Prepare

Exercise 10-19 LRNA Company issued $279,400 14%, 10-year bonds on January 1, 2015, for $294,794. This price resulted in an effective-interest rate of 13% on the bonds interest is payable semiannually on July 1 and January 1. LRNA uses the effective-interest method to amortize bond premium or discount. Prepare the journal entry to record the issuance of the bonds. (Round answers to O decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanatiorn Jan. 1 Cash Debit Credit 294794 Bonds Payable 279400 remium on Bonds Paya 15394 SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record the payment of interest and the premium amortization on July 1, 2015, assuming that interest was not accrued on June 30. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit uly 1 Interest Expense remium on Bonds Payable Cash SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the journal entry to record the accrual of interest and the premium amortization on December 31, 2015. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31

Answer 1

Answer

• All working forms part of the answer
• Three 3 entries asked are provided below, along with required workings

Date	Accounts title	Debit	Credit	Working
Jan-01	Cash	$     294,794		[Cash received on issuance]
	Bonds Payable		$    279,400	[Face Vale = Par Va;ue]
	Premium on Bonds Payable		$       15,394	[Cash received - Face Value]
	(Bonds issued at Premium)
Jul-01	Interest Expense	$        19,162		[$ 294,794 x 13% x 6/12]
	Premium on Bonds Payable	$              396		[$ 19,558 - $ 19,162]
	Cash		$       19,558	[$ 279,400 x 14% x 6/12]
	(Semi annual interest paid)
Dec-31	Interest Expense	$        19,136		[$ (294,794 - $ 396) x 13% x 6/12]
	Premium on Bonds Payable	$              422		[$ 19,558 - $ 19,136]
	Interest payable		$       19,558	[$ 279,400 x 14% x 6/12]
	(Semi annual interest accrued)