Q 1 On January 1, 2014, JWS Corporation issued $704,000 of 9% bonds, due in 10 y
ID: 2465273 • Letter: Q
Question
Q 1
On January 1, 2014, JWS Corporation issued $704,000 of 9% bonds, due in 10 years. The bonds were issued for $660,134, and pay interest each July 1 and January 1. JWS uses the effective-interest method.
Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 10%. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
January 1, 2014
July 1, 2014
December 31, 2014
Q 2
On January 1, 2014, JWS Corporation issued $666,000 of 9% bonds, due in 10 years. The bonds were issued for $624,501, and pay interest each July 1 and January 1. JWS uses the effective-interest method.
Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 10%. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
January 1, 2014
July 1, 2014
December 31, 2014
No.
Date
Account Titles and Explanation
Debit
Credit
(a)January 1, 2014
(b)July 1, 2014
(c)December 31, 2014
Explanation / Answer
Solution:
Q1
Date
account title
Debit
Credit
Jan 1,2014
Cash
660134
Disount on Bonds Payable
43866
Bonds payable
704000
July 1,2014
Interest expense
33,007
Disount on Bonds Payable
1,327
Cash
31,680
Dec 31,2014
Interest expense
33,082
Disount on Bonds Payable
1,402
Cash
31,680
Bond discount=704000-660134=43686
A
B
C
D=B*5%
E=D-C
F
G
H=G-F
Date
Opening book value
Interest payment (704000*4.5%)
Interest expense
amortisatiion
Debit balance in bond discount
credit balance in bonds payable
Book balue of bonds
Jan-01
-
-
-
43,686
704,000
660,134
Jul-01
660,134
31,680
33,007
1,327
42,359
704,000
661,641
Dec-31
661,641
31,680
33,082
1,402
40,957
704,000
663,043
Q2.
Date
account title
Debit
Credit
Jan 1,2014
Cash
624501
Disount on Bonds Payable
41499
Bonds payable
666000
July 1,2014
Interest expense
31,225
Disount on Bonds Payable
1,255
Cash
29,970
Dec 31,2014
Interest expense
31,288
Disount on Bonds Payable
1,318
Cash
29,970
Bond discount=666000-624501=41499
A
B
C
D=B*5%
E=D-C
F
G
H=G-F
Date
Opening book value
Interest payment (666000*4.5%)
Interest expense
amortisatiion
Debit balance in bond discount
credit balance in bonds payable
Book balue of bonds
Jan-01
-
-
-
41,499
666,000
624,501
Jul-01
624,501
29,970
31,225
1,255
40,244
666,000
625,756
Dec-31
625,756
29,970
31,288
1,318
38,926
666,000
627,074
Date
account title
Debit
Credit
Jan 1,2014
Cash
660134
Disount on Bonds Payable
43866
Bonds payable
704000
July 1,2014
Interest expense
33,007
Disount on Bonds Payable
1,327
Cash
31,680
Dec 31,2014
Interest expense
33,082
Disount on Bonds Payable
1,402
Cash
31,680
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