Respuesta :
Answer:
1. The bonds are issued at face value:
(a) Jan 1
Dr Cash 300,000
Cr Bond payable 300,000
( to record cash receipt from bond issuance at par)
(b) Jul 1
Dr Interest expenses 15,000
Cr Cash 15,000
( to record payment of interest expenses calculated as 300,000 x 10% /2)
(c) Dec 31
Dr Interest expenses 15,000
Cr Interest payable 15,000
( to record incurred of interest expenses calculated as 300,000 x 10% /2)
2. The bonds in question 1 were issued at 98.
(a) Jan 1
Dr Cash 294,000
Dr Discount on Bond 6,000
Cr Bond Payable 300,000
( to record cash receipt from bond issuance in which Cash receipt = 300,000 * 98%; Bond Payable is recorded at par $300,000; The difference is recorded as Dr Discount on Bond $6,000)
(b) Jul 1
Dr Interest expenses 15,600
Cr Discount on bond 6,00
Cr Cash 15,000
( to record interest expenses incurred which is consists of $15,000 cash payment and the amortization of Discount on bond account calculated as 6,000/10 interest payment period)
(c) Dec 31
Dr Interest expenses 15,600
Cr Discount on bond 6,00
Cr Interest Payable 15,000
( to record interest expenses incurred which is consists of $15,000 interest payable plus the amortization of Discount on bond account calculated as 6,000/10 interest payment period).
3. Assume the bonds in question 3 were issued at 103:
(a) Jan 1
Dr Cash 309,000
Cr Premium on Bond 9,000
Cr Bond payable 300,000
( to record cash receipt from bond issuance in which Cash receipt = 300,000 * 103%; Bond Payable is recorded at par $300,000; The difference is recorded as Cr Premium on Bond $9,000)
(b) Jul 1
Dr Interest expenses 14,100
Dr Premium on bond 900
Cr Cash 15,000
( to record interest expenses incurred which is consists of $15,000 cash payment minus the allocation of Premium on bond account calculated as 9,000/10 interest payment period)
(c) Dec 31
Dr Interest expenses 14,100
Dr Premium on bond 900
Cr Interest Payable 15,000
( to record interest expenses incurred which is consists of $15,000 interest payable minus the allocation of Premium on bond account calculated as 9,000/10 interest payment period)
Explanation:
The Colson Company's journal entries are as follows:
a) For Issuance:
Jan. 1, 2020:
Debit Cash $300,000
Credit Bonds Payable $300,000
- To record the bonds issuance at face value.
b) July 1 Interest Payment:
Debit Interest Expense $15,000
Credit Cash $15,000
- To record the interest expense and payment.
c) December 31 Adjustment:
Debit Interest Expense $15,000
Credit Interest Payable $15,000
- To record the interest expense.
Question 2:
Jan. 1, 2020:
Debit Cash $294,000
Debit Bonds Discount $6,000
Credit Bonds Payable $300,000
- To record the bonds issuance at discount.
b) July 1 Interest Payment:
Debit Interest Expense $15,600
Credit Bonds Discount Amortization $600
Credit Cash $15,000
- To record the interest expense, amortization, and payment.
c) December 31 Adjustment:
Debit Interest Expense $15,600
Credit Bonds Discount Amortization $600
Credit Interest Payable $15,000
- To record the interest expense and amortization of discount.
Question 3:
Jan. 1, 2020:
Debit Cash $309,000
Credit Bonds Premium $9,000
Credit Bonds Payable $300,000
- To record the bonds issuance and premium.
b) July 1 Interest Payment:
Debit Interest Expense $14,100
Debit Bonds Premium Amortization $900
Credit Cash $15,000
- To record the interest expense, amortization, and payment.
c) December 31 Adjustment:
Debit Interest Expense $14,100
Debit Bonds Premium Amortization $900
Credit Interest Payable $15,000
- To record the interest expense and amortization of premium.
Data and Calculations:
January 1, 2020:
Bonds Issuance at face value = $300,000
Coupon interest rate = 10%
Maturity period = 5 years
Bonds issuance at discount:
Bonds Proceeds = $294,000 ($300,000 x .98)
Bonds Discount = $6,000
Straight-line Amortization semi-annually = $600 ($6,000 /5 x 6/12)
Bonds issuance at premium:
Bonds Proceeds = $309,000 ($300,000 x 1.03)
Bonds Premium = $9,000
Straight-line Amortization semi-annually = $900 ($9,000 /5 x 6/12)
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