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dit View WindowHelp 67% Sat 5:15 AM Parul Mahajan's Birthday Kieso, Intermediate Accounting, 16e INTERMEDIATE ACCOUNTING I & II (310/311/312) Gradebook ORION Downloadable eTextbook ignment CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Brief Exercise 14-5 Grouper Corporation issued $612,000 of 5% bonds on May 1, 2017, The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Grouper's journal entries for (a) the May 1 issuance,(b) the July 1 interest payment, and (e) the December 31 adjusting entry. (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. Round intermediate calculations to 6 declmal places, e.g. 1.251247 and final answer to O decimal places, e.g. 38,548.) Date Account Titles and Explanation Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT MacBook Pro 20 FS F6 F10 86 B 3Explanation / Answer
Grouper company issued $6,12,000 of 5% bonds on May 1 2017.
Journal entry to record the issuance of bond on May 1,2017
Working Note :
Computation of interest received while issuing bond :
Interest = Face value * Interest rate * No of months accrued in year / No of months in a year
= $612,000*5%*4months/12 months
=$ 10,200
Grouper company issued bond on May 1,2017 and pays interest semi annually on july 1 and january 1.
The bonds were issued at a face value plus accrued interest dated january 1 2017, While issuing bond it receives face value plus accrued interest of 4 months (january 1 to may 1).
The amount of interest collected from the bondholder would be credited as interest expense but not as interest income, because on the first interest payment date grouper company would pay 6 months interest to the bondholder.
Journal entry for interest payment :
Calculation : 612000*5%*6/12 = $15,300
Adjusting entry on December 31 :
Interest expense A/c Dr
15300
Calc: $612000*5/100*6/12 = $15,300
Date Accounts title Debit($) Credit($) May 1,2017 Cash A/c Dr 622200 To Bonds payable A/c 612000 To Interest Expense A/c 10200 (Being issuance of bond at facevalue plus accrued interest)Related Questions
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