1. Explanation Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations. Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Premium on bonds payable: It occurs when the bonds are issued at a higher price than the face value. Straight-line amortization method: It is a method of bond amortization that spreads the amount of the bond discount or premium equally over the interest period. Prepare journal entry for issuance of bonds payable on January 1, 2018. Date Account Title and Explanation Post Ref Debit ($) Credit ($) January 1, 2018 Cash 300,328 Premium on Bonds Payable (1) 50,328 Bonds Payable 250,000 (To record the issuance of bonds at premium) Table (1) Cash is an asset and it increases the value of assets. So, debit it by $300,328. Premium on Bonds Payable is an adjunct liability account and it increases the value of liabilities. So, credit it by $50,328. Bonds payable is a liability and it increases the value of liabilities. So, credit it by $250,000. Working note (1): Calculate the premium on bonds payable... 2. To determine Prepare journal entry to record first interest payment on December 31, 2018.

6th Edition

ISBN: 9781260159516

Author: PHILLIPS

Publisher: MCG

See similar textbooks

Concept explainers

Reporting Cash Flows

Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows fro…

Balance Sheet

A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the …

Financial Statements

Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It…

Owner's Capital

Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expect…

Videos

Question

Chapter 10, Problem 11E

To determine

Prepare journal entry to record issuance of bonds.

To determine

Prepare journal entry to record first interest payment on December 31, 2018.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 10, Problem 10E

Chapter 10, Problem 12E

Chapter 10 Solutions

Fundamentals Of Financial Accounting

Ch. 10 - Prob. 1Q Ch. 10 - Prob. 2Q Ch. 10 - What three factors influence the dollar amount...Ch. 10 - Prob. 4Q Ch. 10 - Why is Deferred Revenue considered a liability?Ch. 10 - Prob. 6Q Ch. 10 - Prob. 7Q Ch. 10 - If a company has a long-term loan that has only...Ch. 10 - What are the reasons that some bonds are issued at...Ch. 10 - Prob. 10Q

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Recommended textbooks for you

FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education