Columbo Company issued $300,000, 7%, 20-year bonds on January 1, 2007, at 103. I
ID: 2377078 • Letter: C
Question
Columbo Company issued $300,000, 7%, 20-year bonds on January 1, 2007, at
103. Interest is payable annually on January 1. Columbo uses straight-line amortization
for bond premium or discount.
Instructions
Prepare the journal entries to record the following events.
(a) The issuance of the bonds.
(b) The accrual of interest and the premium amortization on December 31, 2007.
(c) The payment of interest on January 1, 2008.
(d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Explanation / Answer
a Bank a/c dr 309000 To 7% bonds 300000 To premium on issue of bonds 9000 b Interest on bonds dr 21000 To interest payable 21000 Premium on issue of bonds dr 9000 To P & L a/c 9000 c Interest payable dr 21000 To bank 21000 d 7% bonds dr 300000 To bank 300000