Question

Please prepare the journal entries for the following two problems. You will have seven entries per question for a total of 14 journal entries. 1. ABC wants to issue bonds in the amount of 700K which will pay interest semi annually at 8% for 4 years. They will offer them FACE, 96, and 103. Please use the information for completing the seven entries required. UNY Delhi Bookstore

Answer 1

Q1.

Journal of ABC Ltd			($ in '000)
Date	Particulars	LF	Debit	Credit
yr 0	Bank A/c ----------                                                                Dr		672
	Discount on issue of Bonds A/c		28
	To 8% Bonds A/c			700
	( Being 8% Bonds issued at $96 per Bond & redeemable after 4 years at premium of $103)
Yr 1 Q1 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 1 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 1 Q3 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 1 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 2 Q1 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 2 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 2 Q3 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 2 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 3 Q1 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 3 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 3 Q3 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 3 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q1 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q3 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		14
	To Bank A/c			14
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q4 end	8 % Bonds A/c -------------                                              Dr		700
	Premium on redemption of Bonds A/c -----          Dr		21
	To Bank A/c			721
	( Being Debentures redeemed at premium)
Yr 4 Q4 end	Bonds redemption reserve A/c -------                      Dr		700
	To General Reserve			700
	( Being Bonds redemption reserve created)
Yr 4 Q4 end	Securities Premium A/c ---------------------                Dr		21
	To Premium on redemption of Bonds A/c			21
	(Being premium transferred)

Q2

Journal of ABC Ltd			($ in '000)
Date	Particulars	LF	Debit	Credit
yr 0	Bank A/c ----------                                                                Dr		570
	Discount on issue of Bonds A/c		30
	To 8% Bonds A/c			600
	( Being 5% Bonds issued at $95 per Bond & redeemable after 4 years at premium of $101)
Yr 1 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 1 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 2 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 2 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 3 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 3 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q2 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q4 end	Interest on Bonds A/c   (P&L A/c) --------                  Dr		17.5
	To Bank A/c			17.5
	( Being interst on bonds paid & interest expenses will be transferred at the end of the year
Yr 4 Q4 end	8 % Bonds A/c -------------                                              Dr		600
	Premium on redemption of Bonds A/c -----          Dr		6
	To Bank A/c			606
	( Being Debentures redeemed at premium)
Yr 4 Q4 end	Bonds redemption reserve A/c -------                      Dr		600
	To General Reserve			600
	( Being Bonds redemption reserve created)
Yr 4 Q4 end	Securities Premium A/c ---------------------                Dr		6
	To Premium on redemption of Bonds A/c			6
	(Being premium transferred)