Prepare entries to record issuance of bonds, interest accrual, and straight-line
ID: 2577390 • Letter: P
Question
Prepare entries to record issuance of bonds, interest accrual, and straight-line amortization for 2 years.
(LO 5, 6)
Paris Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2019. The bonds were dated January 1 and pay interest annually on January 1. Paris Electric uses the straight-line method to amortize bond premium or discount. The bonds were sold at 104.
Instructions
(a)
Prepare the journal entry to record the issuance of the bonds on January 1, 2019.
(b)
Prepare a bond premium amortization schedule for the first 4 interest periods.
Amortization $12,000
(c)
Prepare the journal entries for interest and the amortization of the premium in 2019 and 2020.
(d)
Show the balance sheet presentation of the bond liability at December 31, 2020.
Premium on bonds payable $96,000
P10-9A Prepare entries to record issuance of bonds, interest accrual, and straight-line amortization for 2 years (L02.6) Paris Electric sold $3,000,000 10% 10-vear bonds on January 1, 2019. The bonds were dated Januarv 1 and pay interest annually on January 1 Paris Electric uses the straight line method to amortize bond premium or discount. The bonds were sold at 104 Instructions (a) Prepare the journal entry to record the issuance of the bonds on January 1. 2019 (b) Prepare a bond premium amortization schedule for the first 4 interest periods Amortization $12,000 (c) Prepare the journal entries for interest and the amortization of the premium in 2019 and 2020 (d) Show the balance sheet presentation of the bond liability at December 31, 2020 Premium on bonds payable S96,000Explanation / Answer
a) Date Accounting titles & Explanations Debit Credit 1/1/2019 Cash(3,000,000*1.04) 3120000 premium on bonds payable 120,000 Bonds payable 3,000,000 b) Bond amortization Schedule year interest interest premium unamorti Carrying paid expense amortized zed pre value 10% 1/1/2019 120,000 3,120,000 1/1/2020 300000 288000 12000 108,000 3,108,000 1/1/2021 300,000 288,000 12,000 96,000 3,096,000 1/1/2022 300,000 288,000 12,000 84,000 3,084,000 1/1/2023 300,000 288,000 12,000 72,000 3,072,000 Journal Entry c) Date Accounting titles & Explanations Debit Credit 12/31/2019 interest expense 288,000 premium on bonds payable 12,000 interest payable 300,000 1/1/2020 interest payable 300,000 cash 300,000 12/31/2020 interest expense 288,000 premium on bonds payable 12,000 interest payable 300,000 d) Balanse Sheet presentation current liabilities interest payable 300,000 long term liabilities bonds payable 3,000,000 less :premium on bonds payable -96,000 3,096,000