Chowan Corporation issued 160,000 of 10% bonds dated January 1, 2013, for $154,9
ID: 2479248 • Letter: C
Question
Chowan Corporation issued 160,000 of 10% bonds dated January 1, 2013, for $154,932.37 on January 1, 2013. The bonds are due December 31, 2016, were issued to yield 11%, and pay interest semiannually on June 30 and December 31. Chowan uses the effective interest method of amortization.Prepare the journal entries to record the issue of the bonds of January 1, 2013, and interest payments on June 30, 2013, and June 30, 2014. Chowan Corporation issued 160,000 of 10% bonds dated January 1, 2013, for $154,932.37 on January 1, 2013. The bonds are due December 31, 2016, were issued to yield 11%, and pay interest semiannually on June 30 and December 31. Chowan uses the effective interest method of amortization.
Prepare the journal entries to record the issue of the bonds of January 1, 2013, and interest payments on June 30, 2013, and June 30, 2014.
Prepare the journal entries to record the issue of the bonds of January 1, 2013, and interest payments on June 30, 2013, and June 30, 2014.
Explanation / Answer
Answer
Note
Figures in $
Year
Cash Interest 5% semi-annually
Effective interest 5.5% (semi-annually)
Discount amortisation
Carrying value of bond
A
B
C
160000*0.05
Last carrying value of bond * 0.055
B-A
Last carrying value of bond + C
Jan-13
154932.37
Jun-13
8000
8521.28
521.28
155453.65
Dec-13
8000
8549.95
549.95
156003.60
Jun-14
8000
8580.20
580.20
156583.80
Dec-14
8000
8612.11
612.11
157195.91
Jun-15
8000
8645.77
645.77
157841.68
Dec-15
8000
8681.29
681.29
158522.98
Jun-16
8000
8718.76
718.76
159241.74
Dec-16
8000
8758.30
758.30
160000.0
Prepare the journal entries to record the issue of the bonds of January 1, 2013, and interest payments on June 30, 2013, and June 30, 2014.
January 1, 2013
Cash A/c Dr. $ 154932.37
To Bonds payable A/c Cr. $ 154932.37
June 30, 2013
Interest Expense A/c Dr. $ 8521.28
To Bonds payable A/c Cr. 521.28
To Cash A/c Cr. $ 8000
June 30, 2014
Interest Expense A/c Dr. $ 8580.20
To Bonds payable A/c Cr. $ 580.20
To Cash A/c Cr. $ 8000
Figures in $
Year
Cash Interest 5% semi-annually
Effective interest 5.5% (semi-annually)
Discount amortisation
Carrying value of bond
A
B
C
160000*0.05
Last carrying value of bond * 0.055
B-A
Last carrying value of bond + C
Jan-13
154932.37
Jun-13
8000
8521.28
521.28
155453.65
Dec-13
8000
8549.95
549.95
156003.60
Jun-14
8000
8580.20
580.20
156583.80
Dec-14
8000
8612.11
612.11
157195.91
Jun-15
8000
8645.77
645.77
157841.68
Dec-15
8000
8681.29
681.29
158522.98
Jun-16
8000
8718.76
718.76
159241.74
Dec-16
8000
8758.30
758.30
160000.0
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