Recording Bond Entries and Amortization - Straight-line method Vandelay Industri

Question

Recording Bond Entries and Amortization - Straight-line method Vandelay Industries Company issued 10 year bonds with a total face amount of S5,000,000 and a stated rate of 9% on December 31, 2013. Semi-annual interest payments are made each June 30 and December 31s. Vandelay uses the straight-line method for amortization of bond discount or premium. What journal entry would Vandelay make to record bond issuance if these bonds are sold for S5,120,000? If the bonds were sold for S5,120,000, what journal entry would Vandelay make to record the first interest payment on June 30, 2014? Consider instead that Vandelay sold these bonds for S4,810,000. What journal entry would the company make to record the bond issue? If the bonds were sold for $4,810,000, what journal entry would Vandelay make to record the first interest payment on June 30, 2014?

Explanation / Answer

Issue of Bonds and Amortizaton of premioum and discount on bond

Journal Entries

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Journal Entries Date Amount($) S.no. Particulars Debit Credit 1 Cash 5120000 31.12.2013 Bonds Payable 5000000 Premium on Bonds Payable 120000 ( Bond issued on Premium) 30.06.2013 Interst Expenses 219000 Premium on Bonds Payable 6000 2 Cash 225000 (payment of interst and Amortization of premioum on bonds payable ) 31.12.2013 Cash 4810000 Discount on Bonds Payable 190000 3 Bonds Payable 5000000 ( Bonds issues at Discount) 30.06.2013 Interst Expenses 234500 Discount on Bonds Payable 9500 4 Cash 225000 (Payment of interst and Amortization of discount on bonds payable )

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