Crane Company issued $468,000, 9%, 15-year bonds on December 31, 2016, for $449,

Question

Crane Company issued $468,000, 9%, 15-year bonds on December 31, 2016, for $449,280. Interest is payable annually on December 31. Crane uses the straight-line method to amortize 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.)

(a) The issuance of the bonds. (b) The payment of interest and the discount amortization on December 31, 2017. (c) 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 Dec 31,2016 Cash 449280 Discount on bonds payable 18720 Bonds payable 468000 Dec 31,2017 Interest expense 40872 Discount on bonds payable (18720/15) 1248 Cash (468000*9%) 42120 Dec 31.2031 Bonds payable 468000 Cash 468000

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