Problem 10-8A (Part Level Submission) Pina Corporation sold $2,160,000, 8%, 5-ye

Question

Problem 10-8A (Part Level Submission)

Pina Corporation sold $2,160,000, 8%, 5-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1. Pina Corporation uses the straight-line method to amortize bond premium or discount.

Date

Account Titles and Explanation

Debit

Credit

Problem 10-8A (Part Level Submission)

Pina Corporation sold $2,160,000, 8%, 5-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1. Pina Corporation uses the straight-line method to amortize bond premium or discount.

Explanation / Answer

(a)

Date Account titles and explanation Debit Credit Jan. 1 Cash ($2,160,000 × 102%) $2,203,200 Bonds Payable $2,160,000 Premium on Bonds Payable $43,200 Dec. 31 Interest Expense $164,160 Premium on Bonds Payable($43,200 ÷ 5) $8,640 Interest Payable($2,160,000 × 8%) $172,800

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