Question

Homework Ch 9

#2

19-23A (similar to) E Question Help dam, Inc., issued $540,000 of 20-year, 5 percent bonds payable on January 1. Adam, Inc., pays interest each January 1 and July 1 and amortizes any discount or premium by the straight-line method. Adam, Inc., can issue its bonds payable under various conditions: (Click the icon to view the conditions.) Read the requirements Requirement 1. Journalize Adam's issuance of the bonds and first semiannual interest payment for each situation. Explanations are not required. (Record debits first, then credits. Exclude explanations from any Journal entries.) a. Record the issuance of the bonds payable at par value. Journal Entry Date Accounts Debit Credit Jan 1 Choose from any list or enter any number in the input fields and then click Check Answer

#3

#4

Answer 1

As per policy, only one question is allowed to answer at a time, so answering #2 :

9-23A) Journal entries without explanations (as required):
Req1)
a) Issued at par:
Date	accounts	Debit	Credit
1-Jan	Cash	540000
	Bonds payable		540000
	(issued at par)
1-Jul	Interest expense	13500		(540000*2.5%)
	Cash		13500
	(1st interest paid)
b)Issued at discount:
Date	accounts	Debit	Credit
1-Jan	Cash	460000
	Discount on Bond payable	80000
	Bonds payable		540000
	(issued at discount)
1-Jul	Interest expense	15500
	Discount on Bond payable		2000	(80000/40)
	Cash		15500	(540000*2.5%)
	(1st interest paid and amortisation at Straight line)
c)Issued at premium:
Date	accounts	Debit	Credit
1-Jan	Cash	600000
	Premium on Bond payable		60000
	Bonds payable		540000
	(issued at premium)
1-Jul	Interest expense	14000
	Premium on Bond payable	1500		(60000/40)
	Cash		14000	(540000*2.5%)
	(1st interest paid and amortisation at Straight line)
Req. 2)The issuance of the Bond on discount will result in highest interest
expense as the discount amortised will be treated as interest
expense.