Question

Blue Company issued $480,000 of 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. Blue Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (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) (a) The issuance of the bonds. (b) The payment of interest and the related amortization on July 1, 2020. (c) The accrual of interest and the related amortization on December 31, 2020. Date Account Titles and Explanation Debit Credit 1/1/20 7/1/20 12/31/20

Answer 1

494400 480000 14,400 Issue Price (480000*1.03) Less : Face Value of the bond Premium on Bonds Payables Premium on Bond Premium amortization = (Premium /Years *2)= (14400/(20*2)) Cash interest ( 480000*10%*6/12) Interest Expenses (24000-360) 360 24000 23640 Entries : Straight-line Method For Amortization of Premium 1. Record the Bond Issue Date General Journal Debit Credit Jan 1 2020 Cash 494400 Premium on Bonds Payable 14400 Bonds Payable 480000

Record the interest Payment Record the interest Payment and amortization on July 1st 2020 Date General Journal Debit Credit July 1 2020 Interest Expenses 23640 Premium on Bonds Payable 360 Cash 24000 Date Dec 31 2020 Record the Accrual of interest on Dec 31 2020 General Journal Debit Credit Interest Expenses 23640 Premium on Bonds Payable 360 Interest Payables 24000