On March 1, 2008, A Co. issued $200,000, 10%, 10 year bonds at 105 plus accrued
ID: 2435482 • Letter: O
Question
On March 1, 2008, A Co. issued $200,000, 10%, 10 year bonds at 105 plus accrued interest. Interest is payable semiannually on June 1, and December 1. The authorization date was December 1, 2006.On October 1, 2010, the entire issue was reacquired at 106.
Make the entries on the issuer's books for the sale of the bonds, the payment of interest, amortization of premium, and accrual of interest, and reacquisition of the bonds needed for 2008, 2009, 2010.
Entries for amortization of the premium are normally made at the end of the calendar year.
Explanation / Answer
March 1 2008 Cash 215,000.00 Bonds Payable 200,000.00 Premium on Bonds Payable 10,000.00 Bond Interest Expense 5,000.00 To record Bonds issued at premium along with interest atof 10 % June 1 2008 Bond Interest Expense 10,000.00 Cash 10,000.00 To record Interst Expense paid June 1 2008 Premium on Bonds Payable 250.00 Bond Interest Expense 250.00 To record amortization of Bond premium at 10 % for 3 months which comes to 10,000*10% * 3/12 Dec1 2008 Bond Interest Expense 10,000.00 Cash 10,000.00 To record Interst Expense paid Dec1 2008 Premium on Bonds Payable 500.00 Bond Interest Expense 500.00 To record amortization of Bond premium for 6 months 10,000 *10% * 6/12 June 1 2009 Bond Interest Expense 10,000.00 Cash 10,000.00 To record Interst Expense paid June 1 2009 Premium on Bonds Payable 500.00 Bond Interest Expense 500.00 To record amortization of Bond premium for 6 months 10,000 *10% * 6/12 Dec 1 2009 Bond Interest Expense 10,000.00 Cash 10,000.00 To record Interst Expense paid Dec 1 2009 Premium on Bonds Payable 500.00 Bond Interest Expense 500.00 To record amortization of Bond premium for 6 months 10,000 *10% * 6/12 June1 2010 Bond Interest Expense 10,000.00 Cash 10,000.00 To record Interst Expense paid Dec 1 2010 Premium on Bonds Payable 500.00 Bond Interest Expense 500.00 To record amortization of Bond premium for 6 months 10,000 *10% * 6/12 Oct 1 2010 Bonds Payable 200,000.00 Premium on Bonds Payable 7,750.00 Loss on redemption 4,250.00 Cash 212,000.00 To record the reacquisition of Bonds. Note It is assumed that Bond Premium is amortized on straight line basis Loss on reacquisition Reacquisition Price - 212,000 Face Value of Bonds - 200000 Add : Unamortized Premium- 7750 207,750 Loss on reacquisition 4250
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.