Columbus issued $40,000 of 10-yr 5%bonds payable on January 1, 2016. Columbus pa
ID: 2563868 • Letter: C
Question
Columbus issued $40,000 of 10-yr 5%bonds payable on January 1, 2016. Columbus pays interesl each January 1 and July 1 and amortizes discourit or premium by Lhe straighl-rne armorlization melhod. The company can issue ils bonds payable under various conditions Read thereaemants Requirement 1. Journaze Columious's issuance of tha bonds and first semiannual interest payment assuming the bonds were issued at face value. Explanations are not raquired. Record debits first, then credits. Exclude explanations firom any joumal entries.) Journalize the issuance of the bond payable at face value Date Accounts Debit Credit Jan. 1 Requirements Journalize the payment af serniannual interest when the bands are issued at face value. 1. bonds and first semlannual Interest Joumalze Columbus's Issuance of the payment assuming the bonds were issued at face value. Explanations are not required. Joumalze Columbus's issuance of the bonds and first semiannual interest payment assuming the bonds were issued at 93. Explanations are not required. Joumalze Columbus's issuance of the payment assuming the bonds were Issued at 10. Explanations are not required. Date 2016 Jul. 1 Accounts Credit 2. 3. bonds and first semiannual interest Requirement 2. Journalize Columbus's issuance of the bonds and first semiannual intarest payment assuming the bonds were issund at 93 Explanations are not requirad (R Joumalize the issuance of tha bond payable at 93 4. Which bond price results in the most interast expense for ColumbusExplain in detail. Date 2016 Jan. 1 Dehit Crerdit PrintDoneExplanation / Answer
Requirement 1 : Bonds issued at face value :
Requirement 2 : Bonds Issued at 93
Requirement 3 : Bonds Issued at 108
Requirement 4 :
Bonds being issued at 93 results in the highest interest expense for Columbus. This is because the discount amortization gets added to the coupon amount.
On the other hand, bonds issued at 108 results in the least interest expense for Columbus, as the amount of premium amortization gets reduced from the coupon amount.
Date Accounts Debit Credit $ $ January 1, 2016 Cash 40,000 Bonds Payable 40,000 July 1, 2016 Interest Expense ( $ 40,000 x 5%) 2,000 Cash 2,000