Question

Cullumber Company issued $456,000, 6%, 30-year bonds on January 1, 2022, at 105. Interest is payable annually on January 1. Cullumber uses straight-line amortization for bond premium or discount. Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The accrual of interest and the premium amortization on December 31, 2022. (c) The payment of interest on January 1, 2023. (d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. Account Titles and Explanation Debit Credit No. Date (a) (b) (c) (d)

Answer 1

Cullumber company:
No.	Date	Account titles and explanation					Debit	Credit
a.	Jan 1,2022	Cash			(456000/100)*105		478800
		Premium on bonds payable			(478800-456000)			22800
		Bonds payable						456000
		(Issuance of the bonds)
b.	Dec 31,2022	Interest expense			(27360-760)		26600
		Premium on bonds payable			(22800/30)		760
		Interest payable			(456000*6%)			27360
		(Accrual of interest and premium amortization)
c.	Jan 1,2023	Interest payable					27360
		Cash						27360
		(Interest paid)
d.	Dec 31,2051	Bonds payable					456000
		Cash						456000
		(Redemption of bonds at maturity)
Flint corporation:
	Date	Account titles and explanation					Debit	Credit
	Apr 30.	Bonds payable					152000
		Loss on redemption					20824
		Discount on bonds payable				(Note:1)		14744
		Cash			(152000/100)*104			158080
		(Redemption of bonds before maturity)
Note:1
Unamortized discount=Face value-Carrying value=152000-137256=$ 14744
Tamarisk Inc.
	Date	Account titles and explanation					Debit	Credit
	June 30.	Bonds payable					176000
		Premium on bonds payable				(Note:2)	14080
		Gain on redemption						22880
		Cash			(176000/100)*95			167200
		(Redemption of bonds before maturity)
Note:2
Unamortized premium=Carrying value-Face value=190080-176000=$ 14080