Question 3 Flint Corporation sold S3,130,000, 8%, 5-year bonds on January 1, 201

Question

Question 3 Flint Corporation sold S3,130,000, 8%, 5-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1. Flint Corporation uses the straight-line method to amortize bond premium or discount. Your answer is correct. Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2017, assuming that the bonds sold at 105. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan Cash 3286500 Bonds Payable 3130000 Premium on Bonds Payable 156500 Dec. 31 Interest Expense 219100 Premium on Bonds Payable 31300 Interest Payable 250400

Explanation / Answer

Journal entries: Date Accounts title and explanation Debit Credit 1-Jan Cash Account Dr. 3286500    Bonds payable Account 3130000    Premium on Bonds payable 156500 31-Dec Interest expense Account Dr. 219100 Premium on bonds payable Dr. (156500*1/5) 31300    Interest payable (3130000*8%) 250400 Journal entries Date Accounts title and explanation Debit Credit 1-Jan Cash Account Dr. 3036100 Discount on bonds payable Dr. 93900    Bonds payable Account 3130000 31-Dec Interest expense Account Dr. 269180    Interest payable (3130000*8%) 250400    Discount on Bonds payable (93900/5) 18780 Req 1. Balance sheet when Issued at 105. Current liabilities: Interest payable 250400 Long term liabilities: Bonds payable 3130000 Add: Premium (156500-31300) 125200 Net bonds payable 3255200 Req 2 Balance sheet when Issued at 105. Current liabilities: Interest payable 250400 Long term liabilities: Bonds payable 3130000 Less: Discount (93900-18780) 75120 Net bonds payable 3054880

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