Joseph Company issued $805,300, 15%, 10-year bonds on December 31, 2010, for $73

Question

Joseph Company issued $805,300, 15%, 10-year bonds on December 31, 2010, for $734,836. Interest is payable semiannually on June 30 and December 31. Joseph Company uses the straight-line method to amortize bond premium or discount.

The issuance of the bonds. (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2.) The payment of interest and the discount amortization on June 30, 2011. (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2.) The payment of interest and the discount amortization on December 31, 2011. (For multiple debit/credit e.g. 10, 5, 3, 2.) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Dec 31'2010

Cash Dr. 734836

Discount on Bonds Payable (805300 - 734836) Dr. 70464

Bonds Payable Cr. 805300

(Being Bonds issued at a discount)

June 30'2011

Bonds Interest Expense Dr. 63920.70 or 63921

Cash (805300*15%*1/2) Cr. 60397.50 or 60398

Discount on Bonds Payable (70464/20) Cr 3523.20

(Being Semi-Annual Interest paid on Bonds and Discount Amortized)

Dec 31'2011

Bonds Interest Expense Dr. 63920.70 or 63921

Cash (805300*15%*1/2) Cr. 60397.50 or 60398

Discount on Bonds Payable (70464/20) Cr 3523.20

(Being Semi-Annual Interest paid on Bonds and Discount Amortized)

Dec 31'2020

Bonds Payable Dr. 805300

Cash Cr. 805300

(Being Bonds Redeemed)

Thanks.

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