Question

On January 1, 2017, Kingbird Corporation issued $680,000 of 9% bonds, due in 8 years. The bonds were issued for $643,151, and pay interest each July 1 and January 1. Kingbird uses the effective-interest method Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective interest rate of 10%. (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.) No. Date Account Titles and Explanation Debit Credit (a) Jan. 1, 2017

Answer 1

Answer: Account Titles and Explanation Cash Discount on Bonds Payable Debit 643,151 36,849 Credit Date Jan 1 2017 Bonds Payable 680,000 To record Issuance of Bonds) Interest Expense (b)July 1, 2017 32,158 Discount on Bonds Payable Cash 1,558 30,600 To record semi-annual interest payment) Dec 31, Interest Expense 2017 32,235 Discount on Bonds Payable Interest Payable 1,635 30,600 To record semi-annual interest payment) Interest Interest Paid Expense iscountUnamortized Amortized Discount Carrying Value 1/1/2017 7/31/2017 12/31/2017 32158 32235 36849 35291 33656 643151 644709 646344 30600 1558 1635 30600