Question

View Policies Current Attempt in Progress On January 1, 2017. Tamarisk Corporation issued $560,000 of 7% bonds, due in 10 years. The bonds were issued for $601,659, and pay interest each July 1 and January 1. The effective-interest rate is 6%. Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Tamarisk uses the effective-interest method. (Round intermediate calculations to 6 decimal places , eg. 1.251247 and final answer to decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit (a) January 1, 2017 No. (b) July 1. 2017 (c) December 31, 2017 OBI а CH 9 TCL

Answer 1

a) Credit Debit $601,659 Date Account Titles and Explanation Jan 1,2017 Cash Premium on bonds payable Bond payable (To record issue of bonds) $41,659 $560,000 b) Credit Date Account Titles and Explanation July 1 2017 Interest expense Premium on bonds payable Cash (To record interest paid) Debit $18,050 $1,550 $19,600 c) Credit Date Account Titles and Explanation Dec 31 2017 Interest expense Premium on bonds payable Interest payable (To record interest accrued) Debit $18,003 $1,597 $19,600 Working notes: Amortization table Effective-Interest Method Date Cash Interest Paid Interest expense Premium Amortization Unamortized Carrying Premium value Jan 1, 2017 July 1 2017 Jan 1 2018 $19,600 $19,600 $18,050 $18,003 $1,550 $1,597 $41,659 $40,109 $38,512 $601,659 $600,109 $598,512 Cash interest at 7% of $560,000 for 6 months