Polk Incorporated issued $242,000 of 7% bonds on July 1, 2019, for $251,421.19. The bonds were dated January 1, 2019, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 6%. Polk uses the effective interest method of amortization. Required: Prepare the journal entries to record the issue of the bonds on July 1, 2019, and the interest payments on December 31, 2019, and June 30, 2020. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2020.
Polk Incorporated issued $242,000 of 7% bonds on July 1, 2019, for $251,421.19. The bonds were dated January 1, 2019, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 6%. Polk uses the effective interest method of amortization. Required: Prepare the journal entries to record the issue of the bonds on July 1, 2019, and the interest payments on December 31, 2019, and June 30, 2020. In addition, prepare a bond interest expense and premium amortization schedule for the bonds through June 30, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Polk Incorporated issued $242,000 of 7% bonds on July 1, 2019, for $251,421.19. The bonds were dated January 1, 2019, pay interest on each June 30 and December 31, are due December 31, 2020, and were issued to yield 6%. Polk uses the effective interest method of amortization.
Required:
| Prepare the |
Prepare a bond interest expense and discount amortization schedule for the bonds through June 30, 2020.
| POLK INCORPORATED | ||||
| Bond Interest Expense and Discount Amortization Schedule (Partial) | ||||
| Effective Interest Method 7% Bonds Sold to Yield 6% | ||||
| Date | Cash Credit | Interest Expense Debit | Unamortized Discount Credit | Book |
| 07/01/19 |
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| 12/31/19 |
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| 06/30/20 |
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Expert Solution
Step 1
Journal entries to record the issue of the bonds on July 1, 2019, and the interest payments on December 31, 2019, and June 30, 2020
|
Journal Entry |
|||
| 2019 |
Particulars |
Amt (Dr) | Amt (Cr) |
| 01-Jul |
Cash Dr |
251421.19 | |
|
To Premium on Bonds payable |
9421.19 | ||
|
To Bonds Payable |
242000 | ||
| 31-Dec |
Interest expense |
7542.64 | |
|
Premium on Bonds Payable |
927.36 | ||
|
To Interest payable |
8470 | ||
| 2020 | |||
| 30-Jun |
Interest expense |
7514.81 | |
|
Premium on Bonds Payable |
955.19 | ||
|
Interest payable |
8470 | ||
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