On January 1, 2017, Sheridan Corporation issued $460,000 of 7% bonds, due in 10

Question

On January 1, 2017, Sheridan Corporation issued $460,000 of 7% bonds, due in 10 years. The bonds were issued for $494,220, and pay interest each July 1 and January 1. The effective-interest rate is 6%. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Sheridan uses the effective-interest method. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) January 1, 2017 Cash 494,220 Bonds Payable 460,000 Premium on Bonds Payable 34,220 (b) July 1, 2017 Interest Expense Premium on Bonds Payable Cash (c) December 31, 2017 Interest Expense Premium on Bonds Payable Interest Payable

Explanation / Answer

Description/Account debit credit (a) cash 494220 January 1 2017 Bonds payable 460000 Premium on bonds payable (494220-460000) 34220 (b) interest expense (494220*6%/2) 14827 July 1 2017 Premium on bonds payable (16100-14827) 1273 Cash (460000*7%/2) 16100 (c) interest expense (494220-1273)*6%/2 14788 December 31 2017 Premium on bonds payable (16100-14788) 1312 Interest payable (460000*7%/2) 16100

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.