On January 1, 2018, Lane Unlimited issues 15%, 10-year bonds payable with a face value of $180,000. The bonds are issued at 105 and pay interest on June 30 and December 31. Requirements: Journalize the semiannual interest payment and amortization of bond premium on December 31, 2018. Journalize the retirement of the bond at maturity, assuming the last interest payment has already been recorded. (Give the date.)
On January 1, 2018, Lane Unlimited issues 15%, 10-year bonds payable with a face value of $180,000. The bonds are issued at 105 and pay interest on June 30 and December 31. Requirements: Journalize the semiannual interest payment and amortization of bond premium on December 31, 2018. Journalize the retirement of the bond at maturity, assuming the last interest payment has already been recorded. (Give the date.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2018, Lane Unlimited issues 15%, 10-year bonds payable with a face value of $180,000. The bonds are issued at 105 and pay interest on June 30 and December 31.
Requirements:
-
Journalize the semiannual interest payment and amortization of bond premium on December 31, 2018.
-
Journalize the retirement of the bond at maturity, assuming the last interest payment has already been recorded. (Give the date.)
Transcribed Image Text:### Requirement 1: Journalize the Issuance of the Bonds on January 1, 2018
**Instructions**: Record debits first, then credits. Select explanations on the last line of the journal entry.
#### Journal Entry:
| **Date** | **Accounts and Explanation** | **Debit** | **Credit** |
|---------------|-------------------------------------------------------------------|-----------|------------|
| 2018 | | | |
| Jan. 1 | Cash | 189,000 | |
| | Premium on Bonds Payable | | 9,000 |
| | Bonds Payable | | 180,000 |
| | *Issued bonds at a premium.* | | |
In this journal entry, the company records the issuance of bonds on January 1, 2018. The issuance was at a premium, meaning the bonds were sold for more than their face value.
- **Cash**: This account is debited by $189,000, indicating an increase in cash from the bond issuance.
- **Premium on Bonds Payable**: This account is credited by $9,000, representing the premium received from issuing the bonds.
- **Bonds Payable**: This account is credited by $180,000, representing the face value of the bonds issued.
Transcribed Image Text:### Requirement 1: Journalize the Issuance of Bonds
#### Date: January 1, 2018
**Accounts:**
- **Cash** (Debits): $189,000
- **Premium on Bonds Payable** (Credits): $9,000
- **Bonds Payable** (Credits): $180,000
---
**Explanation:**
Issued bonds at a premium.
---
**Description:**
The table provided details the journal entry for the issuance of bonds on January 1, 2018. It includes columns for the date, accounts and explanation, debit amounts, and credit amounts. The entry records a debit to the Cash account for $189,000, reflecting an increase in cash. It also shows credits to the Premium on Bonds Payable account for $9,000 and the Bonds Payable account for $180,000, indicating the issuance of bonds at a premium. The explanation confirms this by stating "Issued bonds at a premium."
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