Please show all work possible! Thank you very much! Chowan Corporation issued $8
ID: 2491525 • Letter: P
Question
Please show all work possible! Thank you very much!
Chowan Corporation issued $83,000 of 6% bonds dated January 1, 2016, for $80,147.31 on January 1, 2016. The bonds are due December 31, 2019, were issued to yield 7%, and pay interest semiannually on June 30 and December 31. Chowan uses the effective interest method of amortization. Required: Prepare the journal entries to record the issue of the bonds on January 1, 2016, and the interest payments on June 30, 2016, December 31, 2016, and June 30, 2017. In addition, prepare a bond interest expense and discount amortization schedule for the bonds through June 30, 2017Explanation / Answer
Journal entries
Date
Accounts
Debit
Credit
1/1/16
Cash
80,147.31
Discount on bonds
2,852.69
To Bonds payable
83,000
6/30/16
Interest expense
2,805.15
To discount on bonds
315.16
To Cash
2,490
12/31/16
Interest expense
2,816.19
To discount on bonds
326.19
To Cash
2,490
6/30/17
Interest expense
2,827.60
To discount on bonds
337.60
To Cash
2,490
Table
Date
Cash credit
Interest expense
Unamortized discount
Book value of bonds
1/1/16
2,852.69
80,147.31
6/30/16
2,490
2,805.16
2,537.53
80,462.47
12/31/16
2,490
2,816.19
2,211.34
80,788.66
6/30/17
2,490
2,827.60
1,873.74
81,126.26
Interest paid = 83,000@3% = 2490
Interest expense 80,147.31@3.5% = 2805.16
Amortized = 2805.16 – 2490 = 315.16
Unamortised = 2852.69 – 315.16 = 2,537.53
Journal entries
Date
Accounts
Debit
Credit
1/1/16
Cash
80,147.31
Discount on bonds
2,852.69
To Bonds payable
83,000
6/30/16
Interest expense
2,805.15
To discount on bonds
315.16
To Cash
2,490
12/31/16
Interest expense
2,816.19
To discount on bonds
326.19
To Cash
2,490
6/30/17
Interest expense
2,827.60
To discount on bonds
337.60
To Cash
2,490
Table
Date
Cash credit
Interest expense
Unamortized discount
Book value of bonds
1/1/16
2,852.69
80,147.31
6/30/16
2,490
2,805.16
2,537.53
80,462.47
12/31/16
2,490
2,816.19
2,211.34
80,788.66
6/30/17
2,490
2,827.60
1,873.74
81,126.26
Interest paid = 83,000@3% = 2490
Interest expense 80,147.31@3.5% = 2805.16
Amortized = 2805.16 – 2490 = 315.16
Unamortised = 2852.69 – 315.16 = 2,537.53
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