Question

On January 1, 2020, Metlock Corporation issued $680,000 of 9% bonds, due in 8 years. The bonds were issued for $719,619, and pay interest each July 1 and January 1. The effective-interest rate is 8%.

Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Metlock uses the effective-interest method. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 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.)

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	Jan. 1, 2020July 1, 2020Dec. 31, 2020
(b)	Jan. 1, 2020July 1, 2020Dec. 31, 2020
(c)	Jan. 1, 2020July 1, 2020Dec. 31, 2020

Answer 1

No.	Date	Account Titles and explanation	Debit	Credit
a.	Jan 1, 2020	Cash	$719619
		Bonds payable		680000
		Premium on bonds payable
b.	July 1, 2020	Interest expense (719619*8%*6/12)	28785
		Premium on bonds payable	1815
		Cash (680000*9%*6/12)		30600
c.	Dec. 31, 202	Interest expense (719619*8%5/12)	23987
		Premium on bonds payable	1513
		Interest payable (68000*9%*5/12)		25500