Answer:
1. The bonds are issued at face value:
(a) Jan 1
Dr Cash 300,000
Cr Bond payable 300,000
( to record cash receipt from bond issuance at par)
(b) Jul 1
Dr Interest expenses 15,000
Cr Cash 15,000
( to record payment of interest expenses calculated as 300,000 x 10% /2)
(c) Dec 31
Dr Interest expenses 15,000
Cr Interest payable 15,000
( to record incurred of interest expenses calculated as 300,000 x 10% /2)
2. The bonds in question 1 were issued at 98.
(a) Jan 1
Dr Cash 294,000
Dr Discount on Bond 6,000
Cr Bond Payable 300,000
( to record cash receipt from bond issuance in which Cash receipt = 300,000 * 98%; Bond Payable is recorded at par $300,000; The difference is recorded as Dr Discount on Bond $6,000)
(b) Jul 1
Dr Interest expenses 15,600
Cr Discount on bond 6,00
Cr Cash 15,000
( to record interest expenses incurred which is consists of $15,000 cash payment and the amortization of Discount on bond account calculated as 6,000/10 interest payment period)
(c) Dec 31
Dr Interest expenses 15,600
Cr Discount on bond 6,00
Cr Interest Payable 15,000
( to record interest expenses incurred which is consists of $15,000 interest payable plus the amortization of Discount on bond account calculated as 6,000/10 interest payment period).
3. Assume the bonds in question 3 were issued at 103:
(a) Jan 1
Dr Cash 309,000
Cr Premium on Bond 9,000
Cr Bond payable 300,000
( to record cash receipt from bond issuance in which Cash receipt = 300,000 * 103%; Bond Payable is recorded at par $300,000; The difference is recorded as Cr Premium on Bond $9,000)
(b) Jul 1
Dr Interest expenses 14,100
Dr Premium on bond 900
Cr Cash 15,000
( to record interest expenses incurred which is consists of $15,000 cash payment minus the allocation of Premium on bond account calculated as 9,000/10 interest payment period)
(c) Dec 31
Dr Interest expenses 14,100
Dr Premium on bond 900
Cr Interest Payable 15,000
( to record interest expenses incurred which is consists of $15,000 interest payable minus the allocation of Premium on bond account calculated as 9,000/10 interest payment period)
Explanation:
