US Weygandt, Accounting Principles, 12e ACC 114/121 (ACC 114/12 a Practice Assig
ID: 2521411 • Letter: U
Question
US Weygandt, Accounting Principles, 12e ACC 114/121 (ACC 114/12 a Practice Assignment Gradebook ORION Downloadable eTextbook NEXT Question 1 On May 1, 2017, Herron Corp. issued $910,000, 8%, 5-year bonds at face value. The bonds were dated May 1, 2017, and pay interest annually on May 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation May 1, 2017 Prepare the adjusting entry to record the accrual of interest on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,675.) Date Account Titles and Explanation Debit Credit Dec. 31, 2017Explanation / Answer
Solution:
Part 1 & 2 – Journal Entry for issuance and adjustment entry on Dec 31, 2017
Since bonds are issued at face value. The cash proceeds from issuance of bonds = Face value = $910,000
Date
General Journal
Debit
Credit
May.1, 2017
Cash
$910,000
Bonds Payable
$910,000
Dec.31, 2017
Interest Expense (910,000*8 months / 12 * 8%)
$48,533
Interest Payable
$48,533
Part 3 – Balance Sheet Presentation
Herron Corp.
Balance Sheet (Partial)
Long Term Borrowings:
Bonds Payable
$910,000
Current Liabilities:
Interest Payable
$48,533
Part 4 – Journal Entry to record payment of interest on May 1, 2018
Date
General Journal
Debit
Credit
May.1, 2018
Interest Expense (910,000*4 months / 12 * 8%)
$24,267
Interest Payable
$48,533
Cash
$72,800
Part 5 – Adjustment Entry on Dec 31, 2018
Date
General Journal
Debit
Credit
Dec.31, 2018
Interest Expense (910,000*8 months / 12 * 8%)
$48,533
Interest Payable
$48,533
Part 6 –
Date
General Journal
Debit
Credit
Jan.1, 2019
Interest Payable
$48,533
Cash
$48,533
Jan.1, 2019
Bonds Payable
$910,000
Loss on Retirement of Bonds (bal fig)
$27,300
Cash (910,000*103%)
$937,300
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Date
General Journal
Debit
Credit
May.1, 2017
Cash
$910,000
Bonds Payable
$910,000
Dec.31, 2017
Interest Expense (910,000*8 months / 12 * 8%)
$48,533
Interest Payable
$48,533
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