Answered: Bonds Payable Journal Entries;…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Bonds Payable Journal Entries; Straight-Line Interest Amortization

On December 31, Brown Company issued $400,000 of 20-year, eight percent bonds payable for $331,364, yielding an effective interest rate of ten percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (straight-line interest method) on June 30, and (c) the semiannual interest payment and discount amortization on December 31.

Round answers to the nearest dollar.

General Journal
	Date	Description	Debit	Credit
(a)	12/31/Y1	Cash	Answer	Answer
		Answer	Answer	Answer
		Answer	Answer	Answer
		To record issuance of bonds at a discount.
(b)	06/30/Y2	Answer	Answer	Answer
		Answer	Answer	Answer
		Cash	Answer	Answer
		To record semiannual payment and discount amortization.
(c)	12/31/Y2	Answer	Answer	Answer
		Answer	Answer	Answer
		Cash	Answer	Answer
		To record semiannual payment and discount amortization.