Celine Dion Company issued $1,176,000 of 10%, 20-year bonds on January 1, 2014,

Question

Celine Dion Company issued $1,176,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semiannually on July 1 and January 1. Celine Dion Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. (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.) The issuance of the bonds. The payment of interest and related amortization on July 1, 2014. The accrual of interest and the related amortization on December 31, 2014.

Explanation / Answer

Jan 1, 2014 Debit Cash 11,99,520 (1,176,000/100*102) Credit Premium on bond payable        23,520 Credit Bond Payable 11,76,000 Jul 1, 2014 Debit Interest Expenses        58,212 Debit premium on bond payable              588 (23,520/(20*2)) Credit Cash        58,800 (1,176,000*10%*1/2) Dec 31, 2014 Debit Interest Expenses        58,212 Debit premium on bond payable              588 (23,520/(20*2)) Credit Cash        58,800 (1,176,000*10%*1/2)

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