On the first day of the fiscal year, a company issues an $688,000, 8%, 5-year bo
ID: 2586691 • Letter: O
Question
On the first day of the fiscal year, a company issues an $688,000, 8%, 5-year bond that pays semiannual interest of $27,520 ($688,000 × 8% × 1/2), receiving cash of $646,720.
Required:
Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method on December 31. Refer to the Chart of Accounts for exact wording of account titles.There should be 3 rows in this journal, be sure to include if the journal entry is debit or credit as well.
Chart of Accounts.
Required:
Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method on December 31. Refer to the Chart of Accounts for exact wording of account titles.There should be 3 rows in this journal, be sure to include if the journal entry is debit or credit as well.
Chart of Accounts.
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Notes Receivable 115 Interest Receivable 121 Merchandise Inventory 122 Supplies 131 Prepaid Insurance 140 Land 151 Building 152 Accumulated Depreciation-Building 153 Equipment 154 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 241 Notes Payable 242 Interest Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income SummaryExplanation / Answer
Date Accounting titles & Explanations Debit Credit 31-Dec interest expense 31,648 discount on bonds payable 4,128 cash 27,520 bonds face value 688,000 bond issue price -646,720 discount on bonds payable 41,280 amortization of discount = 41280/(5*2) 4128
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