Question

Exercise 14-5 Kingbird Company issued $420,000 of 10 % , 20- year bonds on January 1, 2017, at 102. Interest is payable semiannually on July 1 and January 1. Kingbird 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 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) a) The issuance of the bonds. The payment of interest and related amortization on July 1, 2017. t The accrual of interest and the related amortization on December 31, 2017. A E d мл

Answer 1

Journal entries

Date	account title and explanation	Debit	Credit
1/1/17	Cash (420000*1.02)	428400
	Bonds payable		420000
	Premium on bonds payable		8400
7/1/17	Interest expense (428400*9.7705%*6/12)	20928
	Premium on bonds payable	72
	Cash (420000*10%*6/12)		21000
12/31/17	Interest expense (428328*9.7705%*6/12)	20925
	Premium on bonds payable	75
	Interest payable		21000