Brief Exercise 14-7 On January 1, 2017, Sunland Corporation issued $580,000 of 9

Question

Brief Exercise 14-7 On January 1, 2017, Sunland Corporation issued $580,000 of 9% bonds, due in 10 years. The bonds were issued for $619,414, and pay interest each July 1 and January 1. The effective-interest rate is 8%. Prepare the company's journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Sunland uses the effective-interest method. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) January 1, 2017 (b) July 1, 2017 c) December 31, 2017

Explanation / Answer

No. Date Account Titles and Explanation Debit Credit (a) January 1, 2017 Cash $619,414 Bonds Payable $580,000 Premium on Bonds Payable $39,414 (b) July 1, 2017 Interest Expense ($619,414 x 8%/2) $24,477 Premium on Bonds Payable $1,323 Cash ($580,000 x 9%/2) $26,100 (c) December 31, 2017 Interest Expense ($619,414 x 8%/2) $24,477 Premium on Bonds Payable $1,323 Interest Payable ($580,000 x 9%/2) $26,100

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