On march 1, 2011, Professors credit union (PCU) issused 6%, 20-yr bonds payable

Question

On march 1, 2011, Professors credit union (PCU) issused 6%, 20-yr bonds payable with maturity value of 900,000. The bonds pay interest on feb 28 and aug 31. PCU amortizes bond premium and discount by the straight-line method.

The issue price of the bonds is 97. journalize the following bond transactions:
a. Issuance of the bonds on march 1, 2011
b. payment of interest and amortization of discount on aug 31, 2011
c. accural of interest and amortization of discount on dec 31,2011
d. payment of interest and amortization of discount on feb 28,2012

Explanation / Answer

a. DR Cash 873,000 DR Discount on Bonds Payable 27,000 CR Bonds Payable 900,000 Same entry for b,d DR Interest expense 27,675 CR Discount on Bonds Payable 675 CR Cash 27,000 c) DR Interest expense 18,450 CR Discount on Bonds Payable 450 CR Interest Payable 18,000

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