Woodwick Company issues 9%, five-year bonds, on December 31, 2016, with a par va
ID: 2395105 • Letter: W
Question
Woodwick Company issues 9%, five-year bonds, on December 31, 2016, with a par value of $104,000 and semiannual interest payments Semiannual Period-End (e) 12/31/2016 (1) 6/30/2017 (2) 12/31/2017 Unamortized Premium $8,191 7,372 6,553 Carrying Value $112,191 111,372 110,553 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, 2016 (b) The first interest payment on June 30, 2017. (c) The second interest payment on December 31, 2017Explanation / Answer
Date
General Journal
Debit
Credit
December 31,2016
Cash A/c
112,191
To Premium on Bonds Payable
8,191
To Bond Payable
104,000
[To record the issue of bond]
June 30, 2017
Bond Interest Expenses A/c
3,861
Premium on Bonds Payable A/c
819
To Cash A/c
4,680
[To record the first interest payment on June 30,2017]
December 31,2017
Bond Interest Expenses A/c
3,861
Premium on Bonds Payable A/c
819
To Cash A/c
4,680
[To record the second interest payment on December 31,2017]
Par Value of the Bond = $104,000
Bond Issue Price = $ 112,191
Premium on Bonds Payable = $112,191 - 104,000 = 8,191
Total Cash Semi annual Payments = $104,000 x 9% x ½ = $4,680
Amortization of Premium on Bond payable over 10 semiannual periods
= $8,191 / 10
= $891
Therefore, Bond Interest Expenses = $4,680 – 891 = $3,861
Date
General Journal
Debit
Credit
December 31,2016
Cash A/c
112,191
To Premium on Bonds Payable
8,191
To Bond Payable
104,000
[To record the issue of bond]
June 30, 2017
Bond Interest Expenses A/c
3,861
Premium on Bonds Payable A/c
819
To Cash A/c
4,680
[To record the first interest payment on June 30,2017]
December 31,2017
Bond Interest Expenses A/c
3,861
Premium on Bonds Payable A/c
819
To Cash A/c
4,680
[To record the second interest payment on December 31,2017]
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