Cullumber Company issued $456,000, 696, 30-year bonds on January 1, 2017, at 105

Question

Cullumber Company issued $456,000, 696, 30-year bonds on January 1, 2017, at 105. Interest is payable annually on January 1, Cullumber 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, 20171 478800 Bonds Payable 456000 Premlum on Bonds Payable 22800 (b) Dec. 31, 2017 Interest Expense 27360 Premium on Bonds Payable 152 Interest Payable 27512

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Jan 1,2017 Cash 478800 Bonds payable 456000 Premium on bonds payable 22800 Dec 31,2017 Interest expense 26600 Premium on bonds payable (22800/30) 760 Interest payable (456000*6%) 27360 Jan 1,2018 Interest payable 27360 Cash 27360 Jan 1,2047 Bonds payable 456000 Cash 456000

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