On January 1, 2019, JP Chemical Company purchases $10,000 of 6% bonds in America
ID: 2548878 • Letter: O
Question
On January 1, 2019, JP Chemical Company purchases $10,000 of 6% bonds in American Airline at a price of 95. JP Chemical Company intends to hold the bonds until the maturity date on January 1, 2029. The interest dates are January 1 and July 1. JP Chemical Company amortizes any discount or premium using the straight-line method. The fiscal year end of JP Chemical Company is December 31.
Required:
Prepare the journal entries on:
1. January 1, 2019
2. July 1, 2019
3. December 31, 2019
4. January 1, 2020
Explanations are required.
Explanation / Answer
Journal entry :
Date accounts & explanation debit credit Jan 1,2019 Cash 9500 Discount on bonds payable 500 Bonds payable 10000 (To record issue bonds payable) July 1,2019 Interest expense 325 Discount on bonds payable (500/20) 25 cash (10000*6%*6/12) 300 (To record interest expense) Dec 31,2019 Interest expense 325 Discount on bonds payable 25 Interest payable 300 (To record interest expense) Jan 1,2020 Interest payable 300 Cash 300 (To record interest paid)