Brief Exercise 14-6 On January 1, 2017, Metlock Corporation issued S490,000 of 7

Question

Brief Exercise 14-6 On January 1, 2017, Metlock Corporation issued S490,000 of 7% bonds due in 8 years. The bonds were issued for $461,453, and pay interest each July 1 and January 1 Metlock uses the effective-interest method Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) Jan. 1, 2017 Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Answers

Date

Accounts titles

Debit

Credit

Working

I Jan 2017

Cash

$                601,659

[given]

Premium on Bonds payable

$                      41,659

[560,000 – 601,659]

Bonds payable

$                    560,000

[given]

01-Jul-17

Interest expense

$                   18,050

[601,659 x 6% x 6/12]

Premium on Bonds payable

$                     1,550

[19600 – 18050]

Cash

$                      19,600

[560,000 x 7% x 6/12]

31-Dec-17

Interest expense

$                   18,003

[ (601659 – 1550) x 6% x 6/12]

Premium on Bonds payable

$                     1,597

[19600 – 18003]

Cash

$                      19,600

[560,000 x 7% x 6/12]

Date

Accounts titles

Debit

Credit

Working

I Jan 2017

Cash

$                601,659

[given]

Premium on Bonds payable

$                      41,659

[560,000 – 601,659]

Bonds payable

$                    560,000

[given]

01-Jul-17

Interest expense

$                   18,050

[601,659 x 6% x 6/12]

Premium on Bonds payable

$                     1,550

[19600 – 18050]

Cash

$                      19,600

[560,000 x 7% x 6/12]

31-Dec-17

Interest expense

$                   18,003

[ (601659 – 1550) x 6% x 6/12]

Premium on Bonds payable

$                     1,597

[19600 – 18003]

Cash

$                      19,600

[560,000 x 7% x 6/12]

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