Love Corporation sold $2,000,000, 6%, 10-year bonds on January 1, 2010. The bond

Question

Love Corporation sold $2,000,000, 6%, 10-year bonds on January 1, 2010. The bonds were dated January 1, 2010, and pay interest on January 1. Love Corporation uses the straight-line method to amortize bond premium or discount.

Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2010, assuming that the bonds sold at 103.

Jan.1
Debit Cash = 2,060,000
Credit Bonds Payable = 2,000,000
Credit Premium on B/p = 60,000

Dec. 31
Debit Bond Interest Expense
Debit Premium on B/P
Credit Bond Interest Payable

Prepare journal entries as in the question above assuming that the bonds sold at 98.

Show the balance sheet presentation for the bond issue at December 31, 2010, using (1) the 103 selling price, and then (2) the 98 selling price.

1 Current Liabilities:

Long Term Liabilities:


2 Current:

Long-term:
Bonds Payable due 2020 = 2,000,000
Less: Discount on Bonds Payable = 40,000

Explanation / Answer

jan1 2010 cash $2,060,000        premiunm on bonds payable $60,000         Bonds payable $2,000,000 Dec 31 2010 Bonds interest expenses $114,000 premium on bonds payable $6,000         Bonds interest payble $120,000 Bonds issued at discount 1-Jan-10 cash $1,960,000 Discount on bonds payable $40,000          Bonds payable $2,000,000 Dec 31 2010 Bonds interest expenses $124,000        Discount on bonds payalbe $4,000        Bonds interest payable $120,000 Balance sheet When bonds issued at premium liabilities Long term liabilities Bonds payable $2,000,000 premium on bonds $60,000 When bonds issued at discount Balance sheet Long termliabilities Bonds payable $2,000,000 Less: discount on bonds $40,000

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