Joseph Company issued $800,000, 11%, 10-year bonds on December 31, 2007, for
$730,000. Interest is payable semiannually on June 30 and December 31. Joseph
Company uses the straight-line method to amortize bond premium or discount.
Instructions Prepare the journal entries to record the following. The issuance of the bonds.
(For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.) The
payment of interest and the discount amortization on June 30, 2008. (For multiple
debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,
2.) The payment of interest and the discount amortization on December 31, 2008. (For
multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,
2.) The redemption of the bonds at maturity, assuming interest for the last interest period
has been paid and recorded.
(a)
Dec.
31
(b)
June
30
(c)
Dec.
31
(d)
Dec.
31
2007
Cash ............................................................ 730,000
Discount on Bonds Payable .....................................
Bonds Payable ................................................
2008
Bond Interest Expense.............................................
Cash ($800,000 X 11% X 1/2) .......................
Discount on Bonds Payable ...........................
($70,000 ÷ 20)
2008
Bond Interest Expense.............................................
Cash ($800,000 X 11% X 1/2) .......................
Discount on Bonds Payable ...........................
2017
Bonds Payable ..........................................................
Cash.................................................................
70,000
800,000
47,500
44,000
3,500
47,500
44,000
3,500
800,000
On May 1, 2008, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The
bonds were dated May 1, 2008, and pay interest semiannually on May 1 and November 1.
Financial statements are prepared annually on December 31. Prepare the journal entry to
800,000
record the issuance of the bonds. Prepare the adjusting entry to record the accrual of
interest on December 31, 2008. Show the balance sheet presentation on December 31,
2008. current liabiliteis, long term liablitities Prepare the journal entry to record payment
of interest on May 1, 2009, assuming no accrual of interest from January 1, 2009, to May
1, 2009. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,
2.) Prepare the journal entry to record payment of interest on November 1, 2009. Assume
that on November 1, 2009, Newby calls the bonds at 102. Record the redemption of the
bonds. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,
2.)
(a)
May
(b)
(c)
Dec.
1
31
2008
Cash .......................................................... 600,000
Bonds Payable..............................................
Bond Interest Expense ..........................................
Bond Interest Payable .................................
($600,000 X 9% X 2/12)
600,000
9,000
9,000
Current Liabilities
Bond Interest Payable ........................................................
$
Long-term Liabilities
Bonds Payable, due 2013....................................................
$600,000
(d)
May
1
2009
Bond Interest Expense ..........................................
($600,000 X 9% X 4/12)
Bond Interest Payable ...........................................
18,000
9,000
Cash ..............................................................
(e)
(f)
Nov.
Nov.
1
1
9,000
27,000
Bond Interest Expense ..........................................
Cash ($600,000 X 9% X 1/2).......................
27,000
Bonds Payable........................................................
Loss on Bond Redemption ....................................
Cash ($600,000 X 1.02)................................
600,000
12,000
27,000
612,000