Question

Exercise 15-15 a-d (Part Level Submission) Carla Vista Company issued $590,000, 6%, 20-year bonds on January 1, 2020, at 104. Interest is payable annually on January 1, Carla Vista uses straight-line amortization for bond premium or discount. (a) Your answer is partially correct. Try again. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Jan 1, 2020 Cash Bonds Payable Premium on Bonds Payable

Prepare the journal entries to record the following:

(a)		The issuance of the bonds.
(b)		The accrual of interest and the premium amortization on December 31, 2020.
(c)		The payment of interest on January 1, 2021.
(d)		The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

Credit Date Jan.1, 2020 Debit $613,600 Account titles and Explanation Cash Bonds Payable Premium on Bonds Payable (Being Bonds issued recorded) $ 590,000 $ 23,600 Dec. 31 2020 $ 34,220 $ 1,180 Interest expenses Premium on Bonds Payable Interest Payable (Being Interest payable recorded) $ 35,400 Jan.1, 2021 $ 35,400 Interest Payable Cash (Being Interest paid recorded) $ 35,400 Jan. 1,2040 $ 590,000 Bonds Payable Cash (Being bonds at maturity recorded) $ 59,000 Working Notes : Jan. 1,2020 Premium on Bonds payable = $590,000*4/100 = $23,600 Cash = $590,000*104/100 = $613,600 Dec. 31,2020 Interest Payable = $590,000*6% = $35,400 Premium on bonds payable = $23,600/20 = $1,180 Interest Expense = $35,40 - $1,180 = $34,220