Exercise 14-6 Straight-Line: Recording bond issuance and premium amortization LO

Question

Exercise 14-6 Straight-Line: Recording bond issuance and premium amortization LO P1, P3

Woodwick Company issues 9%, five-year bonds, on December 31, 2016, with a par value of $109,000 and semiannual interest payments.

Use the above straight-line bond amortization table and prepare journal entries for the following.

(a) The issuance of bonds on December 31, 2016.

(b) The first interest payment on June 30, 2017.

(c) The second interest payment on December 31, 2017.

Semiannual Period-End () 12/31/2016 (1) 6/30/2017 (2) 12/31/2017 Unamortized Premium $8,291 7,462 6,633 Carrying Value $117,291 116,462 115,633

Explanation / Answer

Dec-31-16 Cash 117291       Bonds payable 109000       Premium on Bonds payable 8291 Jun-30-17 Interest expense 4076 Premium on Bonds payable 829       Cash 4905 =109000*9%/2 Dec-31-17 Interest expense 4076 Premium on Bonds payable 829       Cash 4905

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