QUESTION 2 On Janaary 1, 2018, Beverly Evans, Inc issued bonds with a face value

Question

QUESTION 2 On Janaary 1, 2018, Beverly Evans, Inc issued bonds with a face value of $1,500,000. The bonds have a 9% contract rate of interest The fiscal year end is December 31, a. Assuming the bonds are issued at 94 and interest is paid annually on January 1, prepare journal entries to record the (a) issuance of the bonds, (b) accrual of interest on the bonds and amortization and (c) payment of interest on January 1, 2019 the bonds are issued at 106 and interest is paid annually on December 31, prepare journal entries to record the (a) issuance of the bonds, (b) payment of interest on the bonds and TTT Arial

Explanation / Answer

Solution a:

As life of bond is not given in question, it is assumed that maturity period of bond is 10 years.

Solution b:

Journal Entries - Beverly Evanes Inc. Date Particulars Debit Credit 1-Jan-18 Cash Dr $1,410,000.00 Discount on issue of bond Dr $90,000.00          To Bond Payable $1,500,000.00 (To record issue of bond at discount) 31-Dec-18 Interest Expense Dr $144,000.00          To Discount on issue of bond $9,000.00          To Interest Payable ($1,500,000 * 9%) $135,000.00 (To record interest payment and discount amortization) 1-Jan-19 Interest Payable Dr $135,000.00          To Cash $135,000.00 (To record interest payment)

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---