Please answer all 4 of the questions. I will leave a thumbs up, thank you! Wart
ID: 2463187 • Letter: P
Question
Please answer all 4 of the questions. I will leave a thumbs up, thank you!
Wart Ltd issued $8,000,000 face value, five-year, 10% bonds on August 1, 2015 when the market rate of interest was 12%. Interest payments are due quarterly. Wart has a December 31 year end and has adopted the straight-line method of amortizing any premium or discount that may result from the issuance of various financial instruments. Prepare the journal entry to record the issuance of the bonds. Prepare all journal entries required to record the first full year the bonds arc outstanding Clearly outline how all bond related items would be shown on the yearend Statement of Financial Position of Wart Ltd. What is the interest expense that will be shown on the year end income statement of Wart Ltd?Explanation / Answer
1.
Prepare the journal entry to record the issuance of the bonds:
Date
Account title & explanation
Debit
Credit
1-Aug-15
Cash
$ 7,404,295
Discounts on bonds payable
$ 595,705
Bonds payable
$ 8,000,000
For first quarter:
Date
Account title & explanation
Debit
Credit
Sep 30, 2015
Interest expense
$ 229,785
Discounts on bonds payable
$ 29,785
Cash
$ 200,000
Date
Account title & explanation
Debit
Credit
1-Aug-15
Cash
$ 7,404,295
Discounts on bonds payable
$ 595,705
Bonds payable
$ 8,000,000
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