Tipten Company issues $1200,000 of 10%, 10-year bonds on January 1, 2006, at 102
ID: 2500382 • Letter: T
Question
Tipten Company issues $1200,000 of 10%, 10-year bonds on January 1, 2006, at 102. Interest is payable semiannually on July 1 and January 1. The company uses the straight-line method of amortization. Journalize the entries for the bonds on (1) January 1, 2006, (2) July 1, 2006, and (3) December 31, 2006. (b) Show the balance sheet presentation of the bonds at December 31, 2006. (c) Assume on July 1 2006, after paying interest, Tipten calls bonds having a face value of $100,000. The call price is 101. Record the redemption of the bonds.Journalize the entries for the bonds on (1) January 1, 2006, (2) July 1, 2006, and (3) December 31, 2006. (b) Show the balance sheet presentation of the bonds at December 31, 2006. (c) Assume on July 1 2006, after paying interest, Tipten calls bonds having a face value of $600,000. The call price is 101. Record the redemption of the bonds.Journalize the entries for the bonds on (1) January 1, 2006, (2) July 1, 2006, and (3) December 31, 2006. (b) Show the
Explanation / Answer
Answer:(a)
January 1, 2006 (1) Cash A/C Dr. ($1200000*1.02) $1224000
To Bonds Payable A/C $1200000
To Premium on Bonds Payable A/C $24000
July 1, 2006 (2) Bond Interest expense A/C Dr. $ 58000
Premium on bonds Payable A/C Dr. $2000 (24000/20)
To cash A/C $60000
December 31, 2006 Bond Interest expense A/C Dr. $ 58000
Premium on bonds Payable A/C Dr. $2000 (24000/20)
To cash A/C $60000
Answer:(b) Long term Liabilities:
Bonds Payable $1200000
Add: Premium on bonds Payable ($24000-$2000-$2000) $20000 $1220000
Answer:(C) Bonds Payable A/C Dr. $600000
Premium on bonds Payable A/C Dr. $11000 [(24000-2000)*0.50]
To cash A/C $606000
To gain on Bond redemption A/C $5000
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