Presented below are selected transactions on the books of Simonson Corporation.

Question

Presented below are selected transactions on the books of Simonson Corporation.

Prepare journal entries for the transactions above. (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.)

Date

Account Titles and Explanation

Debit

Credit

May 1, 2014

Dec. 31, 2014

(To record the interest)

(To amortize the premium)

Jan. 1, 2015

Apr. 1, 2015

Dec. 31, 2015

(To record the interest)

(To amortize the premium)

May 1, 2014 Bonds payable with a par value of $1,008,000, which are dated January 1, 2014, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 11% (payable annually at January 1), and mature January 1, 2024. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2015 Interest on the bonds is paid. April 1 Bonds with par value of $361,600 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.

Explanation / Answer

Journal entries

To Interest expense

(Cash= 1008,000*106% )+(1008,000 *11%*4/12)

To Interest payable

(1008,000 *11%)

to interest expense

(60,480 * 8/116)

To Gain on redemption of bonds

Premium:60480*(361,600/1008,000)(105/116)= $19,638.62

Interest = 361,600 *11*3/12 = $9944

Cash = 361,600 *102% + 9944 = $378,776

to Interest payable

(1008,000 - 361,600 )11%

60,480*1 2/116 * 64.13% +60,480 *3/116*35.87%

(646,400/1008,000 = 64.13%)

(361,600 /1008,000= 35.87%)

Date Description Debit Credit May 1 ,2014 Cash $1,105,440 To bonds paayble $1,008,000 To Premium on bonds        60,480

To Interest expense

(Cash= 1008,000*106% )+(1008,000 *11%*4/12)

       36,960 Dec 31 ,2014 Interest expense $110,880

To Interest payable

(1008,000 *11%)

$110,880 Premium on bonds payable $4171.03

to interest expense

(60,480 * 8/116)

$4171.03 Jan 1 ,2015 Interest payable $110,880 To Cash $110,880 4/1/2015 Bonds paayble $361,600 Premium on bonds payable     19,638.62 Interest expense    9944.00 To Cash $378,776

To Gain on redemption of bonds

Premium:60480*(361,600/1008,000)(105/116)= $19,638.62

Interest = 361,600 *11*3/12 = $9944

Cash = 361,600 *102% + 9944 = $378,776

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