Question

Crane Company issued $468,000, 9%, 15-year bonds on December 31, 2016, for $449,280. Interest is payable annually on December 31. Crane 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, 2017.
(c)		The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

			Debit	Credit
a	Dec 31,2016	Cash	449280
		Discount on Bonds payable	18720
		Bonds payable		468000
b	Dec 31,2017	Interest expense	43368
		Discount on Bonds payable		1248	=18720/15
		Cash		42120	=468000*9%
c	Dec 31,2031	Bonds payable	468000
		Cash		468000