10.10A Correction I need help with the red boxes that i got wrong. Problem 10-10
ID: 2497521 • Letter: 1
Question
10.10A Correction
I need help with the red boxes that i got wrong.
Problem 10-10A On January 1, 2014, Lock Corporation issued $1,819,000 face value, 596, 10-year bonds at $1,563,482. This price resulted in an effective-interest rate of 7% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January . Your answer is partially correct. Try again. Prepare the journal entry to record the issuance of the bonds on January 1, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 Cash 1563482 Discount on Bonds Paya 255518 Bonds Payable 1819000 SHOW LIST OF ACCOUNTSExplanation / Answer
Discount on bonds payable should be debited instead of crediting by 255518 because actual price of bonds i.e. amount payable in the books will include both the cash paid and discount payable as bonds payable is the total price of bonds.
This is correct
Interset payable is the correct account title and explanation instead of interest expense as the total amount payable is 90950 whereas interest expense incurred is 109444 as provided in previous entry. the difference amount is discount on bonds payable.
Kindly note: all journal entries are provided in the order it has been asked. also all the answer are followed by notes for explanation.
DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT Jan 1 cash 1563482 discount on bonds payable 255518 Bonds payable 1819000Related Questions
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