CHAPTER 10 QUIZ Duncan Inc. issued 500, $1,200, 8%, 25 year bonds on January 1,

Question

CHAPTER 10 QUIZ Duncan Inc. issued 500, $1,200, 8%, 25 year bonds on January 1, 2020, at 102. Interest is payable on January 1. Duncan uses straight-line amortization for bond discounts or premiums. INSTRUCTIONS: Prepare (ON PROPER ACCOUNTING PAPER) thejournal entries to record the tollowing events (OMIT FXPLANATIONSY a) The issuance of the bonds b) The accrual of interest and bond discount (or premium) amortization on December 31, 2020. c) The payment of interest on January 1, 2021 d) The redemption of the bonds at maturity. Assume interest for the last period has been paid and recorded.

Explanation / Answer

a Cash 612000      Bonds payable 600000      Premium on Bonds payable 12000 b Interest expense 47520 Premium on Bonds payable 480 =12000/25        Interest payable 48000 =600000*8% c Interest payable 48000         Cash 48000 d Bonds payable 600000         Cash 600000

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