1.
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Prepare
1.
Answer to Problem 5PSB
Journal entry at the time of issuance of bonds on discount
Explanation of Solution
Date | Particulars | Debit | Credit |
1 Jan | Cash |
| |
Discount on bonds payable
|
| ||
Bonds Payable |
| ||
(Being bonds sold at discount) |
2.
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Compute the amount of total bond interest expense.
2.
Answer to Problem 5PSB
Total bond interest expense to be recognized over the life of bond is
Explanation of Solution
3.
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Prepare first two year amortization table.
3.
Answer to Problem 5PSB
Two years amortization table and check the amount
Explanation of Solution
Semi Annual Period End | Unamortized Discount | Carrying Value |
01/01/2016 |
|
|
06/30/2016 |
|
|
12/31/2016 |
|
|
06/30/2017 |
|
|
12/31/2017 |
|
|
Computation of discount to be amortized for in each semiannual period:
4.
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Journal Entries of First two interest payment.
4.
Answer to Problem 5PSB
Journal Entry for payment of interest on June 30 & 31 December 2016.
Explanation of Solution
Date | Particulars | Debit | Credit |
30 June | Interest Expense on bonds |
| |
Discount on bonds payable |
| ||
Cash |
| ||
(Being semiannual interest paid and discount on bonds amortized) |
Date | Particulars | Debit | Credit |
31Dec | Interest Expense on bonds |
| |
Discount on bonds payable |
| ||
Cash |
| ||
(Being semiannual interest paid and discount on bonds amortized) |
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Chapter 10 Solutions
Financial Accounting: Information for Decisions
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