4:41 PM ooo Verizon 43% LD edugen wileyplus.com US Kimmel, Financial Accounting,

Question

4:41 PM ooo Verizon 43% LD edugen wileyplus.com US Kimmel, Financial Accounting, 7e Help l System Announcements (1 Unread) PRINTER VERSION BACK NEXT CALCULATOR Exercise 10-21 Dailey Company issued $502,500, 9%, 15-year bonds on December 31, 2013, for $482,400. Interest is payable annually on December 31. Dailey uses the straight-line method to amortize bond premium or discount. Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) payment of interest and the discount amortization on December 31 2014 The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded Account Titles and Explanation (a) Dec. 31, 2013 (b) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: SKILL BUILDING Question Attempts: 0 of 5 used E FOR LATER SUBMIT ANSWER Copyright C 2000-2015 by John Wiley & Sons, Inc. or related companies. All rights reserved

Explanation / Answer

Journal Entry on the issuance of bonds

Cash / Bank account ...............Dr 482400

Discount on issue of bonds..........Dr 20100

To Bonds 502500

( Being Bonds of face value issued for 502500)

Total disount to be amortised = 20100

Disount to be amortised every year = 20100/15 i.e 1340

Cash Interest to be paid every year = 502500*9% i.e 45225

Entry for amortisatiion of discount and payment of interest

Interest Expense ..................Dr 46565

To Cash 45225

To Disount on issue of bonds 1340

( Being cash interest paid and disount amortised)

On the date of redemption

Bonds Account ..........................Dr 502500

To Bank / Bond Holders 502500

( Being Debentures bonds paid off)

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