On January 1, 2014, JWS Corporation issued $724,000 of 7% bonds, due in 8 years.
ID: 2465276 • Letter: O
Question
On January 1, 2014, JWS Corporation issued $724,000 of 7% bonds, due in 8 years. The bonds were issued for $769,473 and the effective-interest rate is 6%.
Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
January 1, 2014
July 1, 2014
December 31, 2014
No.
Date
Account Titles and Explanation
Debit
Credit
(a)January 1, 2014
(b)July 1, 2014
(c)December 31, 2014
Explanation / Answer
Amortization schedule
Jan 1
Outstanding Balance 769,473
July 1
Cash Interest Payment 769473 x 7% x 6/12 = 26931
Interest Expense 724000 x 6% x 6/12 = 21720
Discount Amortized 21720 - 26931 = -5211
Outstanding Balance 769,473 - 5211 = 764262
Dec 31
Cash Interest Payable 26,931
Interest Expense 764,262x 8% x 6/12 = 30570
Discount Amortized 3639
Outstanding Balance 764,262 + 3,639 =767901
ENTRIES
(a)
Debit Cash 726000
Debit Discount on Bonds Payable 43,473
Credit Bonds Payable 769473
(b)
Debit Interest Expense 21,720
debit Discount on Bonds Payable 5,211
Credit Cash 26,931
(c)
Debit Interest Expense 30570
Credit Discount on Bonds Payable 3,639
Credit Interest Payable 26,931
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