**Educational Resource on Bond Journal Entries**In this example, we explore the journal entries required for the issuance of bonds and the recording of the first interest payment. This will provide practical insights into handling bonds in accounting.---**Context:**A company issues $6,400,000 of 4-year, 7% bonds at a market (effective) interest rate of 5%, receiving cash of $6,858,887. Interest is payable semiannually on April 1 and October 1.### a. Recording the Issuance of Bonds (April 1, 20Y1)**Journal Entry:**| Account | Debit | Credit ||------------------------------|-----------|----------|| Cash | 6,858,887 | || Premium on Bonds Payable | | 458,887 || Bonds Payable | | 6,400,000 |**Explanation:**- **Cash** is debited for the amount received from the bond issuance.- **Bonds Payable** is credited at face value.- **Premium on Bonds Payable** is credited to reflect the excess cash received over the bond's face value.**Feedback:**- Bonds Payable is always recorded at face value.- Any difference in issue price is reflected in a premium or discount account.- The straight-line method of amortization provides equal amounts of amortization over the life of the bond.---### b. Recording the First Interest Payment (October 1, 20Y1)**Journal Entry:**| Account | Debit | Credit ||------------------------------|--------|----------|| Interest Expense | | || Premium on Bonds Payable | | 224,000 || Cash | | |**Explanation:**- **Interest Expense** and **Cash** details were intended but appear incomplete. Normally, Interest Expense would be debited and Cash credited for the interest payment amount.- **Premium on Bonds Payable** accounts for the amortized portion of the premium over 6 months using the straight-line method, rounded to the nearest dollar.This example illustrates the key components and considerations in journalizing bonds, emphasizing accuracy in interest and premium or discount calculations.

A journal entry is a record of the business transactions in the accounting books of a business. A…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $200,000, 5%, 10-year bond that pays semiannual interest of $5,000 ($200,000 × 5% × ½ year), receiving cash of $200,000. (a) Journalize the entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank. Cash fill in the blank 135942f1f00b052_2 fill in the blank 135942f1f00b052_3 Bonds Payable fill in the blank 135942f1f00b052_5 fill in the blank 135942f1f00b052_6 (b) Journalize the entry to record the first interest payment on June 30. If an amount box does not require an entry, leave it blank. Interest Expense fill in the blank 838d07010fa3fc7_2 fill in the blank 838d07010fa3fc7_3 Cash fill in the blank 838d07010fa3fc7_5 fill in the blank 838d07010fa3fc7_6 (c) Journalize the entry to record the payment of the principal on the maturity date. If an amount box does not require an entry, leave it blank.…
On the first day of the fiscal year, a company issues an $565,000, 9%, 5-year bond that pays semiannual interest of $25,425 ($565,000 x 9% x 1/2), receiving cash of $531,100. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash
On August 1, 2022, Bramble Corp. issued $482,400, 8%, 10-year bonds at face value. Interest is payable annually on August 1. Bramble’s year-end is December 31. 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 Explanation Debit Credit Aug. 1 enter an account title to record the issuance of the bonds on August 1 enter a debit amount enter a credit amount enter an account title to record the issuance of the bonds on August 1 enter a debit amount enter a credit amount eTextbook and Media List of Accounts Prepare the journal entry to record the accrual of interest on December 31, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 enter an…
On the first day of the fiscal year, a company issues a $970,000, 12%, 10-year bond that pays semiannual interest of $58,200 ($970,000 x 12% x 1/2), receiving cash of $1,018,500. Journalize the entry for the first interest payment and amortization of premium using the straight-line method. If an amount box does not require an entry, leave it blank. - Select - - Select - - Select - - Select - - Select - - Select -
Issuing Bonds at Face Amount On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $550,000, 10%, 10-year bond that pays semiannual interest of $27,500 ($550,000 × 10% × ½ year), receiving cash of $550,000. (a) Journalize the entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank. (b) Journalize the entry to record the first interest payment on June 30. If an amount box does not require an entry, leave it blank. (c) Journalize the entry to record the payment of the principal on the maturity date. If an amount box does not require an entry, leave it blank.
On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: Multiple Choice Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. Debit Bond Interest Expense $28,000; credit Cash $28,000. Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200. Debit Bond Interest Expense $14,000; credit Cash $14,000.
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On the first day of the fiscal year, a company issues a $5,000,000, 10%, 4-year bond that pays semiannual interest of $250,000 ($5,000,000 × 10% × ½), receiving cash of $5,336,638. Journalize the bond issuance. If an amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $900,000, 9%, 5-year bond that pays semiannual interest of $40,500 ($900,000 x 9% × 1/2), receiving cash of $884,176. Journalize the entry for the issuance of the bonds.If an amount box does not require an entry, leave it blank
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On the first day of the fiscal year, a company issues a $8,300,000, 6%, 8-year bond that pays semiannual interest of $249,000 ($8,300,000 × 6% × ½), receiving cash of $6,901,364. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense fill in the blank 2 fill in the blank 3 Discount on Bonds Payable fill in the blank 5 fill in the blank 6 Cash fill in the blank 8 fill in the blank 9
on January 1, 2021. Friendly corporation issued $600,000, 4% 5-years bonds at 13 at 103. Interest is payable semiannually on July 1 and January 1. The entry to record the issuance of the bonds would include a debit to premiun on bonds payable for $18,000 discount on bonds payable for $18,000 cash for $618,000 bonds payable for $600,000

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