Whitmore Company issued $493,500 of 5-year, 5% bonds at 98 on January 1, 2017. T

Question

Whitmore Company issued $493,500 of 5-year, 5% bonds at 98 on January 1, 2017. The bonds pay interest annually. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered, Do not indent manually.) Compute the total cost of borrowing for these bonds. Total cost of borrowing $ Prepare the journal entry to record the issuance of the bonds, assuming the bonds were issued at 103. (Credit account titles are automatically indented when amount is entered, Do not indent manually.) Compute the total cost of borrowing for these bonds. Total cost of borrowing $

Explanation / Answer

Answer 1. Cash                                                                              Dr.             483,630 Discount on Issue of Bonds                                Dr.                  9,870      To Bonds-5% A/c          493,500 (Issue of Bonds-5% at $98 per Bond) Cost of borrowings Particulars Amount Interest Paid - $493500 X 5% X 5 years             123,375 Discount on Issue of bonds                  9,870 Total Cost of borrowings             133,245 Answer 2. Cash                                                                              Dr.             508,305      To Bonds-5% A/c          493,500     To Premium on Issue of Bonds             14,805 (Issue of Bonds-5% at $103 per Bond) Cost of borrowings Particulars Amount Interest Paid - $493500 X 5% X 5 years             123,375 Less: Premiun on on Issue of bonds             (14,805) Total Cost of borrowings             108,570

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