On January 1, 2016, Price Co. issued $286,000 of five-year, 8 percent bonds at 9
ID: 2398726 • Letter: O
Question
On January 1, 2016, Price Co. issued $286,000 of five-year, 8 percent bonds at 97. Interest is payable annually on December 31. The discount is amortized using the straight-ine method. Required Prepare the journal entries to record the bond transactions for 2016 and 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the entry for issuance of bonds. Note: Enter debits before credits. Date General Journal Debit Credit Jan 01, 2016 Record entry Clear entry View general journalExplanation / Answer
Answers
Working
Issued at
Face Value
Amount of Premium/Discount
Premium/Discount
Period (years)
Discount to be amortised each year
[A]
[B]
[C = B – A]
[D]
[E = C / D]
[286000 x 97%]
$ 277,420.00
$ 286,000.00
$ 8,580.00
Discount
5
$1,716
Period
Cash Interest to be paid
Discount Amortised
Interest expense
[A = 286,000 x 8%]
[B = calculated above]
[C = A + B]
31-Dec-16
$ 22,880.00
$ 1,716.00
$ 24,596.00
31-Dec-17
$ 22,880.00
$ 1,716.00
$ 24,596.00
31-Dec-18
$ 22,880.00
$ 1,716.00
$ 24,596.00
31-Dec-19
$ 22,880.00
$ 1,716.00
$ 24,596.00
31-Dec-20
$ 22,880.00
$ 1,716.00
$ 24,596.00
Date
Accounts title & Explanation
Debit
Credit
01-Jan-16
Cash
$ 277,420.00
Discounts on Bonds Payable
$ 8,580.00
Bonds Payable
$ 286,000.00
(Bonds issued at discount)
31-Dec-16
Interest Expense
$ 24,596.00
Discounts on Bonds Payable
$ 1,716.00
Cash
$ 22,880.00
(interest expense recognised and paid)
31-Dec-17
Interest Expense
$ 24,596.00
Discounts on Bonds Payable
$ 1,716.00
Cash
$ 22,880.00
(interest expense recognised and paid)
Working
Issued at
Face Value
Amount of Premium/Discount
Premium/Discount
Period (years)
Discount to be amortised each year
[A]
[B]
[C = B – A]
[D]
[E = C / D]
[286000 x 97%]
$ 277,420.00
$ 286,000.00
$ 8,580.00
Discount
5
$1,716
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