Carla Vista Co. issued $474,000, 6%, 30-year bonds on January 1, 2017, at 106. I
ID: 2544036 • Letter: C
Question
Carla Vista Co. issued $474,000, 6%, 30-year bonds on January 1, 2017, at 106. Interest is payable annually on January 1. Carla Vista uses straight-line amortization for bond premium or discount.
Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
(a) The issuance of the bonds. (b) The accrual of interest and the premium amortization on December 31, 2017. (c) The payment of interest on January 1, 2018. (d)The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Explanation / Answer
Journal entry :
Date accounts & explanation debit credit Jan 1,2017 Cash (474000*1.06) 502440 Bonds payabale 474000 Premium on bonds payable 28440 Dec 31,2017 Interest expense 27492 Premium on bonds payable (28440/30) 948 Interest payable (474000*6%) 28440 Jan 1,2018 Interest payable 28440 Cash 28440 Jan 1,2046 Bonds payable 474000 Cash 474000