Prepare journal entries to record the following transactions related to long-ter
ID: 2332220 • Letter: P
Question
Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co.
On April 1, 2016, Quirk issued $2,000,000, 9% bonds for $2,151,472 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2026. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date Account Titles and Explanation Debit Credit
April 1
On July 1, 2018 Quirk retired $600,000 of the bonds at 102 plus accrued interest. Quirk uses straight-line amortization. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
Account Titles and Explanation Debit Credit
(To record interest and premium on bonds)
(To record entry for retirement of bonds)
Explanation / Answer
Account Tites and Explaination Debit Credit (a) Cash $ 21,51,472 Bonds Payable $ 20,00,000 Interest Expense ($20,00,000 X 9% X 3/12) $ 45,000 Premium on bonds payable (Bal. Fig.) $ 1,06,472 Note: Interest for 3 months is taken fo Jan to March (b) Interest Expense (Bal. Fig.) $ 25,362 Premium on bonds payable [$1,06,472 X ($6,00,000/$20,00,000) X (6/117)] $ 1,638 Cash ($6,00,000 X 9% X 6/12) $ 27,000 Note: From April 1, 2016 to January 1,2026 = 117 months ; From April 2018 to July 2018 = 6 m onths Bonds Payable $ 6,00,000 Premium on bonds payable [$1,06,472 X ($6,00,000/$20,00,000) X (90/117)] $ 24,570 Cash ($6,00,000 X 1.02) $ 6,12,000 Gain on redemption of bonds (Bal. Fig.) $ 12,570 Note: From July 1, 2018 to January 1,2026 = 90 months