Dailey Company issued $609,000, 9%, 15-year bonds on December 31, 2013, for $584
ID: 2471119 • Letter: D
Question
Dailey Company issued $609,000, 9%, 15-year bonds on December 31, 2013, for $584,640. 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.) The issuance of the bonds. The 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.Explanation / Answer
Prepare Journal entries:
(a)
The issuance of the bonds:
Date
Account title & explanation
Debit
Credit
Dec 31,
2013
Cash
$ 584,640
Discount on bond payable
$ 24,360
Bonds payable
$ 609,000
(b)
Date
Account title & explanation
Debit
Credit
Dec 31,
2014
Interest expenses ($609,000 *9%)
$ 54,810
Discount on bonds payable ($24,360/15)
$ 1,624
Cash
$ 53,186
(c)
Date
Account title & explanation
Debit
Credit
Dec 31,
2028
Bonds payable
$ 609,000
Cash
$ 609,000
Date
Account title & explanation
Debit
Credit
Dec 31,
2013
Cash
$ 584,640
Discount on bond payable
$ 24,360
Bonds payable
$ 609,000
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