Exercise 14-5 Teal Mountain Inc. issued $700,000 of 15-year, 9.50% bonds on Janu
ID: 2559853 • Letter: E
Question
Exercise 14-5 Teal Mountain Inc. issued $700,000 of 15-year, 9.50% bonds on January 1, 2017 at 103, Interest is payable semi-annually on July 1 and January 1, The company uses the straight-line method of amortization for any bond premium or discount. Prepare the journal entries to record the following: (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. The issuance of the bonds 2. The payment of interest and the related amortization on July 1, 2017 3. The accrual of interest and the related amortization on December 31, 2017 Date Account Titles and Explanation Debit Credit 12/31/17Explanation / Answer
Answer:
Date
Account Title and description
Debit $
Credit $
1/1/2017
Cash (700,000*103%)
721000
TO Bonds payable
700,000
To premium on bonds payable
21,000
( to record the issuance of bond)
7/1/2017
Interest expanses
32550
Premium ob bonds payable
700
To cash
33250
(21000/30) =700
(700,000x 9.5% x 6/12)=33250
(To record the interest payment
semiannually and amortization )
12/31/2017
Interest expanses
32550
Premium ob bonds payable
700
To interest payable
33250
(21000/30) =700
(700,000x 9.5% x 6/12)=33250
(Being adjusting entry for interest expanses and amortization )
Date
Account Title and description
Debit $
Credit $
1/1/2017
Cash (700,000*103%)
721000
TO Bonds payable
700,000
To premium on bonds payable
21,000
( to record the issuance of bond)
7/1/2017
Interest expanses
32550
Premium ob bonds payable
700
To cash
33250
(21000/30) =700
(700,000x 9.5% x 6/12)=33250
(To record the interest payment
semiannually and amortization )
12/31/2017
Interest expanses
32550
Premium ob bonds payable
700
To interest payable
33250
(21000/30) =700
(700,000x 9.5% x 6/12)=33250
(Being adjusting entry for interest expanses and amortization )
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