Brief Exercise 14-6 On January 1, 2017, Martinez Corporation issued $620,000 of

Question

Brief Exercise 14-6 On January 1, 2017, Martinez Corporation issued $620,000 of 9% bonds, due in 8 years. The bonds were issued for $586,402, and pay interest each July 1 and January 1. Martinez uses the effective-interest method. 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. Assume an effective-interest rate of 10%. (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) Jan. 1, 2017 (b) Jan. 1, 2017July 1, 2017Dec. 31, 2017 (c) Jan. 1, 2017July 1, 2017Dec. 31, 2017

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit 2017 jan 1 Cash a/c 586402 Discount on bonds payable 33598 Bonds payable 620000 (To record issuance of bonds payable) 2017 July 1 Interest expenses a/c (586402*10%*6/12) 29320 Amortization of discount on bonds payable 1420 Cash a/c (620000*9%*6/12) 27900 (To record interest paid) 2017, Dec 31 Interest expenses a/c (586402+1420)*10%*6/12 29391 Amortization of discount of bonds payable 1491 Interest payable 27900 (To record interest payable)

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