Question 4 Sunland Company sold $3,280,000 10%, 10-year bonds on January 1, 2017

Question

Question 4 Sunland Company sold $3,280,000 10%, 10-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1 The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually Your answer is correct. Prepare the journal entries to record the issuance of the bonds assuming they sold at: (1) 101 and (2) 96. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation 1. 1/1/17 Cash Debit Credit 312800 Bonds Payable 3280000 Premium on Bonds Payable 32800 2. 1/1/17 Cash 3148800 Discount on Bonds Payable 131200 Bonds Payable 3280000

Explanation / Answer

Journal entries Date Accounts title and explanations Debit $ Credit $ Jan1 17 Cash account Dr. 3312800    Bonds payable Account 3280000    Premium on bonds payable 32800 Jan1 17 Cash account Ddr. 3148800 Discount on Bonds payable Account 131200     Bonds payable Account 3280000 Amortization Tabble: Issue at 101 Period Interest Interest premium Unamortizzed Carrying Amount paid Expense Amortized Premium Issue date 32800 3312800 1 328000 324720 3280 29520 3309520 2 328000 324720 3280 26240 3306240 3 328000 324720 3280 22960 3302960 Issue at 96 Period Interest Interest Discount Unamortizzed Carrying Amount paid Expense Amortized Discount Issue date 131200 3148800 1 328000 341120 13120 118080 3161920 2 328000 341120 13120 104960 3175040 3 328000 341120 13120 91840 3188160

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