AE10-20 Please help! Joseph Company issued $765,300, 12%, 10-year bonds on Decem

Question

AE10-20

Please help!

Joseph Company issued $765,300, 12%, 10-year bonds on December 31, 2010, for $698,336. Interest is payable semiannually on June 30 and December 31. Joseph Company uses the straight-line method to amortize bond premium or discount.

Prepare the journal entries to record the following.

The issuance of the bonds. Date: Dec. 31, 2010

The payment of interest and the discount amortization on June 30, 2011. Date: June.31, 2011

The payment of interest and the discount amortization on December 31, 2011. Date Dec. 31, 2011

The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. Date: Dec.31, 2020.

Explanation / Answer

Hi,

Please find the journal entries as follows:

Dec. 31 2010

Cash Dr. 698336

Discount on Bonds Payable Dr. (765300 - 698336) 66964

Bonds Payable Cr. 765300

June 30 2011

Bond Interest Expense Dr. 49266.2

Cash Dr. (765300*.12*6/12) 45918

Discount on Bonds Payable Cr. (66964/20) 3348.2

Dec 31 3011

Bond Interest Expense Dr. 49266.2

Cash Dr. (765300*.12*6/12) 45918

Discount on Bonds Payable Cr. (66964/20) 3348.2

Dec 31 2020

Bonds Payable Dr. 765300

Cash Cr. 765300

Thanks.

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