Stuck on this accounting question Brief Exercise 10-10 Frankum Company has issue
ID: 2516953 • Letter: S
Question
Stuck on this accounting question
Brief Exercise 10-10 Frankum Company has issued three different bonds during 2015. Interest is payable semiannually on each of these bonds. 1. On January 1, 2015, 1,250, 6%, 5-year, $1,200 bonds dated January 1, 2015, were issued at face value. 2. On July 1, $820,800, 7%, 5-year bonds dated July 1, 2015, were issued at 103 3. On September 1, $322,800, 5%, 5-year bonds dated September 1, 2015, were issued at 99 Prepare the journal entries to record each bond transaction at the date of issuance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 July 1 Sept. 1Explanation / Answer
Ans. Journal Entries for Recording Bond transaction issue (Value in $)
Jan 1 2015 Cash/Bank A/c Dr. 1500000
To 5% Bond A/c 1500000
(Being 5% Bond issued at par value )
July 1 Cash/Bank A/c Dr. 845424
To 7% Bond A/c 820800
To Premium on 7% Bond Issued A/c 24624
(Being 7% Bond issued at Premium of 3 each bond, issued price 103 and face value 100)
Sept 1 Cash/Bank A/c Dr. 319572
Discount on issue of Bond A/c 3228
To 5% Bond A/c 322800
(Being 5% Bond issued at $1 Discount issued price is 99 and face value is 100)
Working Note: 1 No of Bond issue on Jul 1 = 820800/100 = 8208
Issued price is 103, we assume face value is 100, so premium value per bond is 3
Total premium amt (8208X3) = 24624
Total cash collected for issuing bond @103 each = 103X8208 = 845424
Face value of bond is = 8208X100 = 820800
Note 2
Sept 1 Total no of bond issued = 322800/100 = 3228
issued price is 99 so discount value is 1 each
Total discout will be 3228