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jeka57 [31]
3 years ago
13

Adcock Company issued $600,000, 9%, 20-year bonds on January 1, 2020, at 103. Interest is payable annually on January 1. Adcock

uses straight-line amortization for bond premium or discount. Prepare entries to record issuance of bonds, payment of interest, amortization of premium, and redemption at maturity. Instructions Prepare the journal entries to record the following. a. The issuance of the bonds. b. The accrual of interest and the premium amortization on December 31, 2020. c. The payment of interest on January 1, 2021. d. The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Business
1 answer:
FromTheMoon [43]3 years ago
5 0

Answer: Please find answers in explanation column.

Explanation:

a. Journal to record The issuance of the bond

Date Account Titles  Debit              Credit  

Jan. 1 Cash               $618,000  

    9%  Bonds payable                             $600,000  

      Premium on Bonds payable             $18,000

Calculation

Cash = 600,000 x 103% =$618,000

   

b. The accrual of interest and the premium amortization on December 31, 2020

Date Account Titles     Debit             Credit  

Dec. 31 Interest expense    $53,100  

Premium on Bonds payable     $900  

       Interest payable                             $54,000

Calculation

Interest = 600,000 x 9% = $54,000

Premium on bonds = 18,000 /20 = $900

Interest expense=$54,000- $900=$53,100

c.Journal to record  The payment of interest on January 1, 2021.     Date Account Titles           Debit       Credit  

Jan. 1 Interest payable        54000  

                    Cash                                     54000  

d) Journal to record The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.  

Date Account Titles and Explanation Debit      Credit  

Jan. 1, 2 Bonds payable                      $600,000  

       Cash                                                            $600,000

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