On January 31, Dogwood Logistics, Inc , issued ten-year 9% bonds payable with a
ID: 2450430 • Letter: O
Question
On January 31, Dogwood Logistics, Inc , issued ten-year 9% bonds payable with a face value of S1 1,000,000. The bonds were issued at 93 and pay interest on January 31 and July 31. Dogwood Logistics, Inc., amortizes bonds by the straight-line method Requirements Record (a) issuance of the bonds on January 31, (b) the semiannual interest payment and amortization of bond discount on July 31, and (c) the interest accrual and discount amortization on December 31. a. Record the issuance of the bond payable on January 31. (Record debits first, then credits. Explanations are not required) Journal Entry Date Jan 31 Accounts Debit CreditExplanation / Answer
Jan 31 on issue of bond
Cash A/ c Dr 10,230,000
Discount on issue of bond Dr 770,000
To 9% bond payable 11,000,000
(Being bond issued at a discount of 7 per bond)
July 31 Payment of interest and amortisation
Interest expense A/ c Dr 533,500
To Cash A/c 495,000
To Discount on bond 38,500
(Being semi annul interest @ 9% p.a and amortisation)
Dec 31 accrual of interest and amortisation
Interest expense A/ c Dr 444,583.33
To Cash A/c 412,500
To Discount on bond 32,083.33
(Being accrual of semi annul interest @ 9% p.a and amortisation)
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