Brief Exercise 10-16 Cullumber Comoary issues S2.30 milion, 10year, 6% bonds at
ID: 2522577 • Letter: B
Question
Brief Exercise 10-16 Cullumber Comoary issues S2.30 milion, 10year, 6% bonds at 98, with interest payable on December 31. The straight-line method is used to amortize bond discount. ?Your answer is partially correct. Try again. Prepare the yournal entry to record the sale of these bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation on Bands Peyeble Study Your answer is partially correct. Try sgain Prepare the yourmal entry to recard interest expense and bond discount amortization on December 31, 2017, assuming no previous accrual of nterest. (Credit Date Account Tites and Explanetion Dec. 31 account titles are automatically indented when amount is entered. De not indent manually) 8 9 0 deleteExplanation / Answer
Calculation of Annual Coupon Payments Par value of the bond issued is = $23,00,000 Issue at $ 98% = ($ 2,300,000 X 98%) $22,54,000 Discount on the issue of the bond = $46,000.00 Life of the bonds = 10 years Amortization per year = $ 46,000 / 10 years = $4,600.00 CALCULATION OF THE INTEREST EXPENSES OF THE YEAR 1 Interest Expesnes is $ 23,00,000 X 6% = $1,38,000 Amortization of the year 1 is also taken as interest cost = $4,600 Total interest expesnes of the year 1` $1,42,600 Journal Entries Date Account Title and explanation Debit Credit January 01, 2017 Cash $ 22,54,000 Discount on the bonds Payable $ 46,000 To Bonds payable $ 23,00,000 Interest Expesnes $ 1,42,600 December 31, 2017 To discount on bonds payable $ 4,600 To Cash $ 1,38,000 Note: Your sollution is also correct but amount entrred by you in the millon is wrong, we have to put full amount figure
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