Question

please provide the journa entries with the credited and debited section.

5. On January 1, 2014, Davie Services issued $20,000 of 8% bonds that mature in five years. They were sold at a premium, for a total of $20,750, Please provide the journal entry to issue the bonds. (3 points) 6. On January 2, 2014. Mahoney Sales issued $10,000 in bonds for S10,900. They were 5-year bonds with a stated rate of 4%, and pay semiannual interest payments. Mahoney Sales uses the straight-line method to amortize the bond premium. Please provide the journal entry for the first interest payment to be made on June 30, 2014. (3 points)

Answer 1

Solution

Q5. Journal entry to record bond issue:

Date	Account Titles	Debit	Credit
Jan 1, 2014	Cash	$20,750
	Premium on Bonds Payable		$750
	Bonds Payable		$20,000
	(To record the issue of bonds at premium)

Computations:

Face value of bonds = $20,000

Bond issue price = $20,750

Premium on bonds payable = 20,750 – 20,000 = $750

Q6. Entry to record first interest payment to be made on June 30, 2014:

Date	Account Titles	Debit	Credit
June 30, 2014	Interest Expense	$110
	Premium on Bonds Payable	$90
	Cash		$200
	(To record the first interest payment)

Computations:

Face value of bonds = $10,000

Issue price = $10,900

Premium = 10,900 – 10,000 = $900

Period = 5years x 2 semi-annual periods = 10 periods

Straight line method of premium amortization,

Premium on bonds payable = 900/10 = $90

Interest payment = 10,000 x 4% x 6/12 = $200

Interest expense = interest payment – premium amortization

Interest expense = 200 – 90 = $110