Question

Exercise 14-5 Cullumber Company issued $564,000 of 10%, 20-year bonds on January 1, 2017, at 102. Interest is payable semiannually on July 1 and January 1. Cullum ber Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 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 related amortization on July 1, 2017 (c) The accrual of interest and the related amortization on December 31, 2017 Date Account Titles and Explanation Debit Credit 12/31/17 Click if you would like to Show Work for this question: Open Show Work

Answer 1

Date	Account Titles and Explanation	Debit	Credit
1/1/17	Cash (5640 bonds x $102)	$575,280
	Bonds Payable		$564,000
	Premium on Bonds Payable		$11,280
7/1/17	Interest expense ($575,280 x 9.7705% x 1/2)	$28104
	Premium on Bonds Payable (28200-28104)	$96
	Cash (564000 x 10% x 1/2)		$28,200
12/31/17	Interest expense ($575,280 -96 x 9.7705% x 1/2)	$28,099
	Premium on Bonds Payable (28200-28099)	$101
	Cash (564000 x 10% x 1/2)		$28,200