Question

Saylor Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually. Your answer is partially correct. Prepare the journal entries to record the issuance of the bonds assuming they sold at: (1) 103 and (2) 98. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit 1. 1/1/22 Bonds Payable 3000000 2. 1/1/22 Discount on Bonds Payable

Answer 1

Solution 1:

Saylor Co.
Journal Entries
Date	Particulars	Debit	Credit
01-Jan-22	Cash A/c Dr ($3,000,000*103%)	$30,90,000
	To bonds payable		$30,00,000
	To Premium on bonds Payable		$90,000
	(Being bond issued at premium)
01-Jan-22	Cash A/c Dr ($3,000,000*98%)	$29,40,000
	Discount on Bonds Payable	$60,000
	To bonds payable		$30,00,000
	(Being bond issued at Discount

Solution 2:

Annual Interest period	Interest to be paid	Interest expense	Premium Amortization	Unamortized premium	Carrying value
Issue date				$90,000	$30,90,000
1	240000	231000	9000	$81,000	$30,81,000
2	240000	231000	9000	$72,000	$30,72,000
3	240000	231000	9000	$63,000	$30,63,000

Annual Interest period	Interest to be paid	Interest expense	Discount Amortization	Unamortized Discount	Carrying value
Issue date				$60,000	$29,40,000
1	240000	246000	6000	$54,000	$29,46,000
2	240000	246000	6000	$48,000	$29,52,000
3	240000	246000	6000	$42,000	$29,58,000

Solution 3:

Saylor Co.
Journal Entries
Date	Particulars	Debit	Credit
31-Dec-22	Interest Expense Dr	$2,31,000
	Premium on bond Dr	$9,000
	To Cash		$2,40,000
	(To record Interest Paid and Amortization of Premium on issue)
31-Dec-22	Interest Expense Dr	$2,46,000
	To Discount on bond Dr		$6,000
	To Cash		$2,40,000
	(To record Interest paid and Amorization of Discount on issue)

Solution 4:

Saylor Co.
Balance Sheet (Partial)
At December 31, 2022
Long Term Liabilities:
Bond Payable	$30,00,000
Add: Unamortized Premium (90000*9/10)	$81,000	$30,81,000

Solution 5:

Saylor Co.
Balance Sheet (Partial)
At December 31, 2022
Long Term Liabilities:
Bond Payable	$30,00,000
Less: Unamortized Discount (60000*9/10)	$54,000	$29,46,000