Caruba Company issued $400,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable semiannually on July 1 and January 1. Caruba uses straight-line amortization for bond premium or discount.
Prepare the journal entries to record the following.
(a) The issuance of the bonds.
(b) The payment of interest and the premium amortization on July 1, 2012, assuming that interest was not accrued on June 30.
(c) The accrual of interest and the premium amortization on December 31, 2012.
(d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
(b) The payment of interest and the premium amortization on July 1, 2012, assuming that interest was not accrued on June 30.
(c) The accrual of interest and the premium amortization on December 31, 2012.
(d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
(a)
Jan. 1, 2012
Jan. 1, 2012
Cash Debit ($400,000 x 103%)412,000
Bonds Payable Credit 400,000
Premium on Bonds Payable Credit 12,000
Bonds Payable Credit 400,000
Premium on Bonds Payable Credit 12,000
(b)
July 1, 2012
July 1, 2012
Interest Expense Debit 17,700
Premium on Bonds Payable Debit ($12,000 x 1/40)300
Cash Credit ($400,000 x 9% x 1/2)18,000
Premium on Bonds Payable Debit ($12,000 x 1/40)300
Cash Credit ($400,000 x 9% x 1/2)18,000
(c)
Dec. 31, 2012
Interest Expense Debit 17,700
Premium on Bonds Payable Debit 300
Interest Payable Credit 18,000
Dec. 31, 2012
Interest Expense Debit 17,700
Premium on Bonds Payable Debit 300
Interest Payable Credit 18,000
(d)
Jan. 1, 2032
Bonds Payable Debit 400,000
Cash Credit 400,000
Jan. 1, 2032
Bonds Payable Debit 400,000
Cash Credit 400,000
No comments:
Post a Comment