Gridley Company issued $640,000, 12%, 10-year bonds on December 31, 2014, for $6
ID: 2456367 • Letter: G
Question
Gridley Company issued $640,000, 12%, 10-year bonds on December 31, 2014, for $620,800. Interest is payable semiannually on June 30 and December 31. Gridley Company uses the straight-line method to amortize bond premium or discount.
A. Prepare the journal entry to record the issuance of the bonds.
B. Prepare the journal entry to record the payment of interest and the discount amortization on June 30, 2015.
C. Prepare the journal entry to record the payment of interest and the discount amortization on December 31, 2015.
D. Prepare the journal entry to record the redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Explanation / Answer
Answer:A
Cash A/C Dr. $620800
Discount on bonds payable A/C Dr. $19200
To bonds payable A/C $640000
Answer:B. 30 June 2015
Dr Interest expense $39360
Cr Cash $38400 ($640,000 x 12% x 1/2)
Cr. Discount on bonds payable $960 (19200/20)
Answer:C. 31 Dec 2015:
Dr Interest expense $39360
Cr Cash $38400 ($640,000 x 12% x 1/2)
Cr. Discount on bonds payable $960 (19200/20)
Answer:D.
Dr Bonds Payable 640,000
Dr. Loss on doscount of bonds redemmed $19200
Cr Cash 640,000
Cr. Discount on bonds payable A/C $19200
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.