Question

Pharoah Company issued $465,000, 7%, 30-year bonds on January 1, 2022, at 104. Interest is payable annually on January 1. Pharoah 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.

Answer 1

Please find below table useful to compute desired results: -

А 1 Debit Credit 4 =465000/100*104 =465000 =465000/100*4 2 Date Account Titles and Explanation 3 Jan. 1, 2022 a. The issuance of bonds Cash Bonds Payable Premium on Bonds Payable 7 Dec. 31, 2022]. The accrual of interest and premium amortization 8 Interest expense Premium on Bonds Payable 10 Interest Payable 11 Jan. 1. 2023 c. The payment of interest 12 Interest Payable 13 Cash 14 Jan. 1. 2052 Jd. The redemption of bonds at maturity 15 Bonds Payable 16 Cash =D10-C9 =D6/30 9 =D5*0.07 1=D10 =C12 =C15

End results would be as follows: -

C D Debit Credit 4 $483.600 $465.000 $18.600 A 1 2 Date Account Titles and Explanation 3 Jan. 1, 2022 Ja. The issuance of bonds Cash Bonds Payable Premium on Bonds Payable Dec. 31, 2022]. The accrual of interest and premium amortization Interest expense Premium on Bonds Payable Interest Payable 11 Jan. 1. 2023 c. The payment of interest 12 Interest Payable 13 Cash 14 Jan. 1. 2052 Jd. The redemption of bonds at maturity Bonds Payable 16 Cash $31.930 $620 9 10 $32.550 $32.550 $32,550 15 $465,000 $465.000