Question

Exercise 15-15 a-d Ivanhoe Company issued $430,000, 9%, 20-year bonds on January 1, 2020, at 102. Interest is payable annually on January 1. Ivanhoe uses straight-line amortization for bond premium or discount. 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 Debit Credit Jan. 1, 2020 Cash 438600 Bonds Payable 430000 Premium on Bonds Payable 8600 SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record the accrual of interest and the premium amortization on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020 Interest Expense Premium on Bonds Payable Interest Payable SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record the payment of interest on January 1, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2021

Answer 1

1. Journal Entries -

Credit Journal Entries Date Accounts Title Debit Jan 1, 2020 Cash $438,600 Bond Payable Premium on bonds Payable (Being Bond issued at premium) $ 430,000 $ 8,600 Dec 31, 2020 Interest Expense $ 38,270 Premium on bonds Payable $ 430 Interest Payable (Being interest booked) $ 38,700 $ 38,700 Jan 1, 2021 Interest Payable Cash (Being interest paid) $ 38,700 Jan 1, 2040 Bond Payable $430,000 Cash (Being Payment of Bond liability) $ 430,000

Explanation -

2nd and 3rd Entry will be made every year and after 20 years 4th entry will be made.