Question

Oriole Company issued $696,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Oriole Company uses the effective interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (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 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The payment of interest and related amortization on July 1, 2020. (c) The accrual of interest and the related amortization on December 31, 2020. Date Account Titles and Explanation Debit Credit 1/1/20 Cash 709920 Premium on Bonds Payable 13920 Bonds Payable 696000 7/1/20 Interest Expense Premium on Bonds Payable Cash 34800 12/31/20 Interest Expense Premium on Bonds Payable Interest Payable 34800

Please fill in the missing journal entries and show work and explain why please!

Answer 1

Debit $709,920 Date Account Title and Explanation 1/1/20 Cash Bonds Payable Premium on Bonds Payable 7/1/20 Interest Expense Premium on Bonds Payable Cash 12/31/20 Interest Expense Premium on Bonds Payable Interest Payable $34,681 $119 Credit [$696000 x 102%] $696,000 $13,920 --> $709920 - $696000 [$709920 x 9.7705% / 2] [Balancing figure --> Premium amortized] $34,800 ($696000 x 10% / 2] [($709920 - 119) x 9.7705% / 2] [Balancing figure --> Premium amortized] $34,800 $696000 x 10% / 2] $34,676 $124