Question

Presented below are selected transactions on the books of Culver Corporation. May 1, 2020 Bonds payable with a par value of $861,600, which are dated January 1, 2020, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 11% (payable annually at January 1), and mature January 1, 2030. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2021 Interest on the bonds is paid. April 1 Bonds with par value of $344,640 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized. Prepare journal entries for the transactions above.

Answer 1

B C D 1 Journal Entry 2 Date Particulars debit credit 944888 4 01-May-17 Cash Bonds Payable Premium on Bonds Payable Interest Expense (record the issue of bonds) 944888 51696 31592 94776 31-Dec-17 Interest Expense Interest Payable (Record the interest) 94776 3565 31-Dec-17 Premium on Bonds Payable Interest Expense (To amortize premium) 3565 94776 01-Jan-18 Interest Payable Cash (record the interest paid) 94776

21 22 23 01-Apr-18 Bonds Payable Premium on Bonds Payable Interest Expense Cash Gain on Redemption of Bonds 344640 18718 9478 25 26 361011 11824 27 28 56866 29 31-Dec-18 Interest Expense Interest Payable (Record the interest) 56866 31 3744 33 31-Dec-18 Premium on Bonds Payable Interest Expense (To amortize premium) 3744

1 Journal Entry 2 Date Particulars debit credit 4. 42856 =861600*106%+(861600*11%*4/12) =C4 covou Cash Bonds Payable Premium on Bonds Payable Interest Expense (record the issue of bonds) =861600*6% =861600 *11% *4/12 43100 =861600 *11% Interest Expense Interest Payable (Record the interest) =C10 12 13 14 43100 1=51696 * 8/116 15 Premium on Bonds Payable Interest Expense (To amortize premium) =C14 16 18 43101 94776 Interest Payable Cash (record the interest paid) 94776

22 43191 Bonds Payable Premium on Bonds Payable Interest Expense Cash Gain on Redemption of Bonds 344640 |=51696 *(344640 / 861600) *(105/116) =344640*11% *3/12 =344640 *102% + 9478 =C22+C23+C24-D25 28 43465 =(861600 - 344640) *11% 29 Interest Expense Interest Payable (Record the interest) =C28 31 32 43465 Premium on Bonds Payable Interest Expense (To amortize premium) "=(51696 *12/116 *0.6) + (51696 *3/116 *0.4) | =C32 35