Gridley Company issued $800,000, 11%, 10-year bonds on December 31, 2018, for $7

Question

Gridley Company issued $800,000, 11%, 10-year bonds on December 31, 2018, for $730,000. Interest is payable annually on December 31. Gridley Company uses the straight-line method to amortize bond premium or discount.

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2018

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2019

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2028

Gridley Company issued $800,000, 11%, 10-year bonds on December 31, 2018, for $730,000. Interest is payable annually on December 31. Gridley Company uses the straight-line method to amortize bond premium or discount.

Explanation / Answer

Dec. 31, 2018 Cash 730000 Discount on bonds payable 70000          Bonds payable 800000 Dec. 31, 2019 Interest expense 95000         Discount on bonds payable 7000 =70000/10         Cash 88000 =800000*11% Dec. 31, 2028 Bonds payable 800000         Cash 800000

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