Wainwright Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2015. The

Question

Wainwright Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2015. The bonds were dated January 1 and pay interest July 1 and January 1. Wainwright Electric uses the straight-line method to amortize bond premium or discount. The bonds were sold at 104. Assume no interest is accrued on June 30.

Instructions:

- Prepare the journal entries to record the issuance of the bonds on January 1,2015.

- Prepare a bond premium amortization schedule for the first 4 interest periods.

- Prepare the journal entries for interest and the amortization of the premium in 2015 and 2016.

- Show the balance sheet presentation of the bond liability at December 31, 2016.

Explanation / Answer

Solution-

1/1/2015 Banks A/C                                  Dr. 3,120,000 To 10% Bonds 3,000,000 To Premium on 10% Bonds 120,000

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