Question

Suppose that ABC Co. were to issue a 5-year, $148,000 bond that had a coupon rate of 5% and paid interest annually under each of the following alternatives: (a) yield rate = 4%, assuming the issue price is $154,589.11. (b) yield rate = 5%, assuming the issue price is $148,000. (c) yield rate = 6%, assuming the issue price is $141,765.94.

(a) Your answer is partially correct. Try again. Prepare the journal entries for both the issuance of the bond as well as the first interest payment when the yield rate is 4%. (Round answers to 2 decimal places, e.g. 15.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record issue of bonds) (To record interest payment) SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT Attempts: 2 of 2 used

(b) Prepare the journal entries for both the issuance of the bond as well as the first interest payment when the yield rate is 5%. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record issue of bonds) (To record interest payment)

Part (b) only

List of accounts :

Cash
Income Tax Expense
Income Tax Payable
Interest Expense
Interest Payable
Lease Liability
Mortgage Payable
No Entry
Notes Payable
Right-of-use Asset

Answer 1

	Account Titles and Explanation	Debit	Credit
a)	Cash	154,589.11
	Bonds payable		148,000
	Premium on bonds payable		6,589.11
	Interest expense [154,589.11*4%]	6183.56
	Premium on bonds payable	1216.44
	Interest payable		7400
b)	Cash	148,000
	Bonds payable		148,000
	Interest expense	7400
	Cash		7400
c)	Cash	141,765.94
	Discount on bonds payable	6,234.06
	Bonds payable		148,000
	Interest expense [141,765.94*6%]	8505.96
	Discount on bonds payable		1105.96
	Interest payable		7400