Question

On April 1, 2021, Western Communications, Inc., issued 12% bonds, dated March 1, 2021, with face amount of $38 million. The bonds sold for $37.3 million and mature on February 28, 2024. Interest is paid semiannually on August 31 and February 28. Stillworth Corporation acquired $38,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31, and both firms use the straight-line method. Required: 1. Prepare the journal entries to record (a) issuance of the bonds by Western and (b) Stillworth's investment on April 1, 2021. 2. Prepare the journal entries by both firms to record all subsequent events related to the bonds through maturity Complete this question by entering your answers in the tabs below. Req 1 Req 2 Western ROG 2 Stillworth S Prepare the journal entries to record (a) issuance of the bonds by Western and (b) Stillworth's Investment on April 1, 2021. (if no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list

Answer 1

1&2)

Journal entries in Western:
Date	Acc Titles	Debit $	Credit $
1-Mar-21	Cash	37300000
	Discount on Bond payable	700000
	Bond payable		38000000
	(issue of bonds on discount)
31-Aug-21	Interest exp.	2396666.67
	Discount on Bond payable		116666.67	(700000/6)
	Cash		2280000	(38000000*12%/2)
	(Interest paid)
31-Dec-21	Interest exp.	1597777.78
	Discount on Bond payable		77777.78	(116666.67*4/6)
	Interest payable		1520000	(2280000*4/6)
	(Interest exp. made due)
28-Feb-22	Interest exp.	798888.89
	Interest payable	1520000
	Discount on Bond payable		38888.89	(116666.67*2/6)
	Cash		2280000	(38000000*12%/2)
	(Interest paid)
31-Aug-22	Interest exp.	2396666.67
	Discount on Bond payable		116666.67	(700000/6)
	Cash		2280000	(38000000*12%/2)
	(Interest paid)
31-Dec-22	Interest exp.	1597777.78
	Discount on Bond payable		77777.78	(116666.67*4/6)
	Interest payable		1520000	(2280000*4/6)
	(Interest exp. made due)
28-Feb-23	Interest exp.	798888.89
	Interest payable	1520000
	Discount on Bond payable		38888.89	(116666.67*2/6)
	Cash		2280000	(38000000*12%/2)
	(Interest paid)
31-Aug-23	Interest exp.	2396666.67
	Discount on Bond payable		116666.67	(700000/6)
	Cash		2280000	(38000000*12%/2)
	(Interest paid)
31-Dec-23	Interest exp.	1597777.78
	Discount on Bond payable		77777.78	(116666.67*4/6)
	Interest payable		1520000	(2280000*4/6)
	(Interest exp. made due)
28-Feb-24	Bond Payable	38000000
	Interest exp.	798888.89
	Interest payable	1520000
	Discount on Bond payable		38888.89	(116666.67*2/6)
	Cash		40280000	(38000000*12%/2)
	(Interest & principle paid)

Journal entries in Stillworth:
Date	Acc Titles	Debit $	Credit $
1-Mar-21	Bond Receivable	38000
	Discount on Bond payable		700	0.7*38000/38
	Cash		37300
	(purchase of bonds on discount)
31-Aug-21	Cash	2280		38000*6%
	Discount on Bond payable	116.67		700/6
	Interest revenue		2396.67
	(Interest received)
31-Dec-21	Interest receivable	1520		38000*4*6%/6
	Discount on Bond payable	77.78		116.67*4/6
	Interest revenue		1597.78
	(Interest revenue made due)
28-Feb-22	Cash	2280		38000*6%
	Discount on Bond payable	38.89		116.67*2/6
	Interest revenue		798.89
	Interest receivable		1520
	(Interest paid)
31-Aug-22	Cash	2280		38000*6%
	Discount on Bond payable	116.67		700/6
	Interest revenue		2396.67
	(Interest received)
31-Dec-22	Interest receivable	1520		38000*4*6%/6
	Discount on Bond payable	77.78		116.67*4/6
	Interest revenue		1597.78
	(Interest received)
28-Feb-23	Cash	2280		38000*6%
	Discount on Bond payable	38.89		116.67*2/6
	Interest revenue		798.89
	Interest receivable		1520
	(Interest revenue made due)
31-Aug-23	Cash	2280		38000*6%
	Discount on Bond payable	116.67		700/6
	Interest revenue		2396.67
	(Interest received)
31-Dec-23	Interest receivable	1520		38000*4*6%/6
	Discount on Bond payable	77.78		116.67*4/6
	Interest revenue		1597.78
	(Interest received)
28-Feb-24	Cash	40280		(38000*6%)+38000
	Discount on Bond payable	38.89		116.67*2/6
	Interest revenue		798.89
	Interest receivable		1520
	Bond Receivable		38000
	(Interest and principle received)