Question

4.On July 1, 2019, Godex Company paid $180,000 to purchase $200,000 of bonds that carry a 5% contract rate of interest and will mature in 5 years from the date of purchase. Interest on the bonds paid June 30 and December 31 of each year. Godox Company is a public company that prepares its financial statements in accordance with IFRS. It plans to hold the bonds until maturity and amortizes the premium or discount on bonds by the effective-interest method. As of December 31, 2019, the bonds had a market value of $185,000. (20 marks) (Long term Liability) a. Prepare all necessary journal entries for 2019 dealing with the investment in bonds.

Answer 1

ANSWER

Credit ($) Date Particulars July-01 Cash Discount on bonds payable Bonds payable (to record purchase bonds at discount) Debit ($) 180000 20000 200000 5000 500 June-30 Bonds interest expense Discount on bonds payable Cash (To record interedt payment and discoount amortization) 4500 Dec-31 5000 500 Bonds interedt expense Discount on bonds payable Cash (To record interest payment and discount amortization) 4500

b) Bonds would be presented on the balance sheet as of Dec 31, 2019 Long term-liabilities: Bonds payable 5% contract rate dur in 5 years 200000 Less: Discount on bonds payable 20000 180000 Interest payments - semi annually 5000

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