Question

Oriole Company issued $306,000, 7%, 15-year bonds on December 31, 2021, for $293,760. Interest is payable annually on December 31. Oriole uses the straight-line method to amortize bond premium or discount.

Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a)		The issuance of the bonds.
(b)		The payment of interest and the discount amortization on December 31, 2022.
(c)		The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

Date	Particulars	Debit	Credit
31-Dec 21	Cash	$        293,760
	Discount on Bonds Payable (306000-293760)	$          12,240
	Bonds Payable		$        306,000
	(To Record Issue of bonds)
31-Dec 22	Interest (12,240/15)	$                816
	Discount on Bonds Payable		$                816
	(To Record Ammortization of bond discount)
31-Dec 22	Interest (306,000*7%)	$          21,420
	Interest Payable		$          21,420
	(To record annual accrued bond interest)
31-Dec 22	Interest Payable	$          21,420
	Cash		$          21,420
	(To record payment of bond Interest)
31-Dec	Bonds Payable	$        306,000
	Cash		$        306,000
	(To record redemption of bond at maturity)