Grocery Corporation received $320,578 for 11.00 percent bonds issued on January
ID: 2513830 • Letter: G
Question
Grocery Corporation received $320,578 for 11.00 percent bonds issued on January 1, 2015, at a market interest rate of 8.00 percent. The bonds had a total face value of $268,000, stated that interest would be paid each December 31, and stated that they mature in 10 years.
Complete the following table for each account by indicating (a) whether it is reported on the Balance Sheet (B/S) or Income Statement (I/S); (b) the dollar amount by which the account increases, decreases, or does not change (0) when Grocery Corporation issued the bonds; and (c) the direction of change in the account [increase, decrease, or no change] when Grocery Corporation records the interest payment on December 31.
Grocery Corporation received $320,578 for 11.00 percent bonds issued on January 1, 2015, at a market interest rate of 8.00 percent. The bonds had a total face value of $268,000, stated that interest would be paid each December 31, and stated that they mature in 10 years.
Explanation / Answer
The entry would be:
Debit Credit
Cash 320,578
Premium 42,578
Bonds Payable 268,000
Cash would be reported in Balance Sheet
Premium would be reported in income statement
Bonds payable would be reported in Balance Sheet
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