Question

Exercise 14-5 Kingbird Inc. ssued $710,000 of 20 year 9.50% bonds on January 1, 2017 at 103 Interest s payable se method of amortization for any bond premium or discount annua y on and Ja ary . The company s estraight Prepare the journal entries to record the following: (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. The issuance of the bonds 2. The payment of interest and the related amortization on July 1, 2017 3. The accrual of interest and the related amortization on December 31, 2017 Date Account Titles and Explanation Debit Credit 12/31/17

Answer 1

Date	Accounts titles	Debit	Credit
01-Jan-17	Cash	$      7,31,300
	Premium on bonds payable		$          21,300
	Bonds payable		$      7,10,000
	(Issue of bonds at $103 each))
01-Jul-17	Interest expense	$          33,193
	Premium on bonds payable	$                533
	Cash		$          33,725
	(Interest on bond)
31-Dec-17	Interest expense	$          33,193
	Premium on bonds payable	$                533
	Interest payable		$          33,725
	(Interest on bond)

Working

Face value of bond	$    7,10,000.00
Issue price of Bond (310000/100*103)	$    7,31,300.00
Premium on bonds	$       21,300.00
Term of bond (in years)	20
Discount on bond amortized per year (12400/5)	$          1,065.00
Amortization for half year	$             532.50
Interest on bond for year(310000 x 10%)	$       67,450.00
Interets for half year	$       33,725.00