Brief Exercise 14-6 On January 1, 2017, Concord Corporation issued $690,000 of 9

Question

Brief Exercise 14-6 On January 1, 2017, Concord Corporation issued $690,000 of 9% bonds, due in 10 years. The bonds were issued for $647,006, and pay interest each July 1 and January 1. Concord 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 10%. (Round intermediate calculations to 6 decimal places, e.g. 1.2S 1247 and final answer to O decimal places, e.g. 38,S48. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account tities are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) Jan. 1, 2017

Explanation / Answer

Value of Bond would be $ 683586

No Date Account Titles & Explaination Debit Credit (a) 01/01/2017 Bank A/c 647006 To 9% Bonds(Concord corporation) 647006 (Being Amount received for Issuance of 9% Bonds) (b) 01/07/2017 Interest on Bond A/c 32350 To Bank A/c 31050 To 9% Bonds (Concord Corporation) 1300 (Being Interest Liability as per Effective rate of Interest will be $647006*10%*6/12 for half year.But Interest would be paid to bond holders at coupon rate which will be calulated at coupon rate.) (c) 31/12/2017 Interest on bond A/c 32415 To Bond Holders a/c 31050 To 9% Bonds (Concord Corporation) 1365 (Same as above now bond value as on 01/07/2017 would be $648306.3*5%*6/12 would be $ 32415 & $ 31050 would be paid to bond holders on 01 jan 2018 Balance would be transferred to corporate bond account (d) 01/01/2026

Value of Bond would be $ 683586

(e) 01/07/2026 Interest on Bond A/c 34179 To Bank A/c 31050 To 9% Bonds 3129 (Same as Above as shown in 01/07/2017 Entry) (f) 31/12/2026 Interest on Bond A/c 34335 To Bond Holders A/c 31050 To 9 % Bonds 3285 31/12/2016 Value of Bond at the time of Redemption would be $690000(683586+3129+3285) redemption assumed to be at face value

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