Bonds Issued at Par Raymont Corporation has a June 30 fiscal year end. On Januar
ID: 2471804 • Letter: B
Question
Bonds Issued at Par
Raymont Corporation has a June 30 fiscal year end. On January 1, 2016, Raymont issues 10 –year bonds with a face value of $800,000, and a stated interest rate of 6%, with interest payable semi-annually on April 1 and October 1 each year. Raymont uses the straight-line method to amortize any bond premium or discount. Record the journal entries required on January 1, 2016, April 1, 2016, and June 30, 2016 assuming the bonds were issued at par. Remember to account for accrued interest to the issue date. Show calculations for partial credit.
Bonds Issued at a Discount: Record the journal entries required at January 1, 2016, April 1, 2016, and June 30, 2016 assuming the bonds were issued at 98. Remember to account for accrued interest. Show calculations for partial credit.
Bonds Issued at a Premium: Record the journal entries required at January 1, 2016, April 1, 2016, and June 30, 2016 assuming the bonds were issued at 104. Remember to account for accrued interest. Show calculations for partial credit.
Explanation / Answer
Amt in $ Amt in $ If Bonds Issue at par 01-Jan-16 Cash A/C dr. 800,000 To bonds Payable 800,000 01-Apr-16 Interest Expenses A/C dr. 24000 To cash 24000 (800000*6%)/2 01-Oct-16 Interest Expenses A/C dr. 24000 To cash 24000 (800000*6%)/2 If Bonds Issue at Discount 01-Jan-16 Cash A/C dr. 784,000 Discount on Bonds Payable 16,000 To bonds Payable 800,000 01-Apr-16 Interest Expenses A/C dr. 24800 To cash 24000 To Discount on Bonds Payable 800 01-Oct-16 Interest Expenses A/C dr. 24800 To cash 24000 To Discount on Bonds Payable 800 Calculation of interest and amortization (800000*6%)/2* (16000/10/2) If Bonds Issue at Premium 01-Jan-16 Cash A/C dr. 832,000 To bonds Payable 800,000 To Premium on Bonds payable 32000 01-Apr-16 Interest Expenses A/C dr. 22400 Premium on Bonds payable 1600 To cash 24000 01-Oct-16 Interest Expenses A/C dr. 22400 Premium on Bonds payable 1600 To cash 24000 Calculation of interest and amortization (800000*6%)/2* (32000/10/2)