Wildhorse Co. issued $480,000, 9%, 30-year bonds on January 1, 2017, at 105. Int

Question

Wildhorse Co. issued $480,000, 9%, 30-year bonds on January 1, 2017, at 105. Interest is payable annually on January 1. Wildhorse 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.) (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. No. Date Account Titles and Explanation Debit Credit (a) Jan. 1, 2017 (b) Dec. 31, 2017 (c) Jan. 1, 2018 (d) Jan. 1, 2047

Explanation / Answer

Jan 1, 2017 Cash (480000*105%) 504000 Premium on bonds payable 24000 Bonds payable 480000 Dec 1, 2017 Interest expense 42400 Premium on bonds payable (24000/30) 800 Interest payable (480000*9%) 43200 Jan 1, 2018 Interest payable 43200 Cash 43200 Jan 1, 2047 Bonds payable 480000 Cash 480000

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