Popi Company issued $500,000 of 5-year, 8% bonds at 97 on January 1, 2015. The b
ID: 2457164 • Letter: P
Question
Popi Company issued $500,000 of 5-year, 8% bonds at 97 on January 1, 2015. The bonds pay interest twice a year. Instructions Part A 1 Prepare the journal entry to record the issuance of the bonds. 2 Prepare the journal entry to record interest expense July 1 and Dec 31 3 Prepare the balance sheet presentation on Dec 31 2016 Part B Repeat the 3 requirements from part (A), assuming the bonds were issued at 102. Popi Company issued $500,000 of 5-year, 8% bonds at 102 on January 1, 2015. The bonds pay interest twice a year. 1 Prepare the journal entry to record the issuance of the bonds. 2 Prepare the journal entry to record interest expense July 1 and Dec 31 3 Prepare the balance sheet presentation on Dec 31 2016 Popi Company issued $500,000 of 5-year, 8% bonds at 97 on January 1, 2015. The bonds pay interest twice a year. Instructions Part A 1 Prepare the journal entry to record the issuance of the bonds. 2 Prepare the journal entry to record interest expense July 1 and Dec 31 3 Prepare the balance sheet presentation on Dec 31 2016 Part B Repeat the 3 requirements from part (A), assuming the bonds were issued at 102. Popi Company issued $500,000 of 5-year, 8% bonds at 102 on January 1, 2015. The bonds pay interest twice a year. 1 Prepare the journal entry to record the issuance of the bonds. 2 Prepare the journal entry to record interest expense July 1 and Dec 31 3 Prepare the balance sheet presentation on Dec 31 2016Explanation / Answer
We assume that the par value of the Bonds is $100 and in part A they have been issued at discount and in Part B at premium.
Number of bonds issued = 500000 / 100 = 5000
Part A
Issuance of bonds
Cash A/c debit 485000
Discount on Bonds Payable debit 15000
To Bonds Payable credit 500000
July 1 & December 31 entry
Interest Expense debit 21500
To Discount on Bonds Payable credit 1500
To Cash credit 20000
Balance sheet
Balance Sheet - Liabilities
Bonds Payable - $500000
Discount on Bonds Payable - $12000
Part B
Issuance of bonds
Cash debit 510000
To Bonds Payable credit 500000
To Premium on Bonds Payable credit 10000
July 31 & December 31 entry
Interest Expense debit 19000
Premium on Bonds Payable debit 1000
To Cash credit 20000
Balance sheet Liabilities
Bonds Payable - $500000
Premium on Bonds Payable - $8000