ygahdt, Financial Accounting, 9e FINANCIAL ACCOUNTING-Undergrad (33 010 272) cti
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ygahdt, Financial Accounting, 9e FINANCIAL ACCOUNTING-Undergrad (33 010 272) ctice Gradebook ORION Downloadable eTextbook nment PRINTER Exercise 10-21 Gridley Company issued $736,000 12% 10-year bonds on December 31, 2014 for S713S20 Interest method to amortize bond premium or discount. eeyalle se man aly June 30, d Dee tera Gr le Co imum i e- o- Prepare the journal entry to record the issuance of the bonds.(Credit account titles are automatically indented when amount is entered. Do not indent manually-) Date Account Titles and Credit Dec. 31, 2014 account titfes are automatically Indented when amount is entered D to record the payment of interest and the discount amortization on Me 30, 2015. (Ondr account .resan . Prepare te journal en not indent manually Account Titles and June 30, 2015 424.33 Prepare the journal entry to record the payment of interest and the discount amortization on December 31, 2015.(Credit account cibles are automatically indented when amount is entered not indent manuallv.)Explanation / Answer
1. Journal Entries for Bonds
Date
Account
Debit
Credit
Dec 31 2014
Cash
Discount on Bonds Payable
TO Bonds Payable
713,920
22,080
736,000
June 30 2015
Interest Expense (736,000 x 6%)
TO Discounts on bonds payable
TO Cash
44,160
1,104
44,160
Dec 31 2015
Interest Expense (736,000 x 6%)
TO Discounts on bonds payable
TO Cash
44,160
1,104
44,160
Dec 31 2024
Bonds Payable
TO Cash
736,000
736,000
Note: Calculation of discount amortization on each interest payment date.
Total Discount to be amortized = 22,080
Number of installments of interest = 10year x 2 semi-annual = 20 instalments
Amortization of discount on each interest payment date = 22,080 / 20 = $1,104
Date
Account
Debit
Credit
Dec 31 2014
Cash
Discount on Bonds Payable
TO Bonds Payable
713,920
22,080
736,000
June 30 2015
Interest Expense (736,000 x 6%)
TO Discounts on bonds payable
TO Cash
44,160
1,104
44,160
Dec 31 2015
Interest Expense (736,000 x 6%)
TO Discounts on bonds payable
TO Cash
44,160
1,104
44,160
Dec 31 2024
Bonds Payable
TO Cash
736,000
736,000
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