Nivan Co. issued $500,000 of 5%, 10-year callable bonds on January 1, 2016, at t

Question

Nivan Co. issued $500,000 of 5%, 10-year callable bonds on January 1, 2016, at their face value. The call premium was 3% ( bonds are callable at 103). Interest was payable annually on december 331l. The bonds were called on December 31st, 2020. Required Prepare all the general journal entries related to these bonds for 2016 and 2017. Exercise 10-19A On January 1, 2016, the Diamond Association issued bonds with an face value of $300,000, a stated rate of interest of 6%, and an 10-year term to maturity.Interest is payable in cash on December 31st of each year. The effective rate of interest was 7% of the time the bonds were issued. The bonds sold for $278,932. Diamond use the effective interest rate method to amortize the bond discount. Required a.Determine the amount of the discount on the day of issue. b. Determine the amount of interest expense record lines on December 31st, 2016. c. Determine the carrying value of the bond liability on December 31st, 2016. d.Provide the general journal entry necessary to record the December 31st, 2016, interest.

Explanation / Answer

Ans-

2016 Issue of bonds 1-Jan 1 Bank A/c   Dr. 500000 5% Callable bonds 500000 Interest expenses 31-Dec 2 Interest expenses 25000 Cash 25000 31-Dec 3 Premium amortization 3000 Premium on callable bonds 3000 500,000*3%/5 3000

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