Brief Exercise 10-16 Carla Vista Co. issues $4.00 million, 10-year 8% bonds at 9

Question

Brief Exercise 10-16 Carla Vista Co. issues $4.00 million, 10-year 8% bonds at 99, with interest payable on December 31 The straight line method s used to amortize on discount. Prepare the journal 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 Jan. 1 Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record interest expense and bond discount amortization on December 31, 2017, assuming no previous accrual of interest. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Dec. 31 Debit Credit

Explanation / Answer

JOURNAL ENTRY :

DATE ACCOUNTS & EXPLANATION DEBIT CREDIT Jan 1 Cash a/c 3.96 Discount on bonds amortization 0.04        Bonds payable a/c 4 (To record issue of bonds payable) Dec 31 Interest expenses a/c 0.404       Discount on bonds amortization a/c (0.04/10) 0.004        Cash a/c (4*10%) 0.40 (To record bond discount amortization)

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