Question

Capital Company issued $600,000, 10%, 20-year bonds on January 1, 2020, at 103. Interest is payable annually January 1. Capital uses the straight-line method of amortization and has a calendar year end.
Required:
Prepare all journal entries made in 2017 related to the bond issue.

Answer 1

Answer:

Explanation:

Preparation of all journal entries made in 2017 related to the bond issue.)

Jan.1

Dr Cash $618,000

Cr Bonds Payable $618,000

Cr Premium on Bonds Payable. $8,000D

c.3 Interest Expense $59,100

Dr Premium on Bonds Payable $900

($18,000 *$20)

Cr Interest Payable $60,000

($600,000 × 10% = $60,000)