Oriole Company issued $495,000, 9%, 30-year bonds on January 1, 2017, at 103. In

Question

Oriole Company issued $495,000, 9%, 30-year bonds on January 1, 2017, at 103. Interest is payable annually on January 1. Oriole uses straight-line amortization for 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.)

No.

Date

Account Titles and Explanation

Debit

Credit

Jan. 1, 2017

Dec. 31, 2017

Jan. 1, 2018

Jan. 1, 2047

(a) The issuance of the bonds. (b) The accrual of interest and the premium amortization on December 31, 2017. (c) The payment of interest on January 1, 2018. (d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Explanation / Answer

Journal entry :

No Date accounts & explanation debit credit (a) Jan. 1, 2017 Cash 509850      Bonds payable 495000      Premium on bonds payable 14850 (To record issue bonds payable) (b) Dec 31,2017 Interest expense 44055 Premium on bonds payable (14850/30) 495      Interest payable (495000*9%) 44550 (To record accured interest) (c) Jan. 1, 2018 Interest payable 44550     Cash 44550 (To record interest paid) (d) Jan. 1, 2047 Bonds payable 495000      Cash 495000 (To record redemption of bonds)

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