On February 1, 2018. Wolf Inc issued 12% bonds dated February 1, 2018, with a fa

Question

On February 1, 2018. Wolf Inc issued 12% bonds dated February 1, 2018, with a face amount of $100,000 The bonds sold for tm7160 and mature in 20 years. The effective interest rate for these bonds was 10% interest is paid semiannually on July 31 and January Wolf's fiscal year is the calendar year Wolf uses the effective interest method of amortization. Required 1. Prepare the journal entry to record the bond issuance on February 1. 2018. 2 Prepare the entry to record interest on July 31, 2018. 3. Prepare the necessary jourmal entry on December 31, 2018. 4. Prepare the necessary journal entry on January 31, 2019 Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4 Prepare the journal entry to record the bond issuance on February 1, 2018. (If no entry is required tor à transaction/event, select "No journal entry required in the first account field) View transaction ist Journal entry worksheet Record the bond issuance on February 1, 2018, Note: Enter debts before credes

Explanation / Answer

DATE

PARTICULAR

DEBIT

CREDIT

01-02-2018

Bank A/c                                                     Dr.

                           To Premium on Bond

                           To 12% Bond A/c

( Being 12% Bond Issued)

$117160

$17160

$100000

31-07-2018

Interest A/c                                                          Dr.

Premium on Bonds(Balance)                            Dr.

                           To Bank A/c

(Being Interest paid for half year)(Note 1)

$5858

$142

$6000

31-12-2018

Interest A/c                                                          Dr.

Premium on Bonds(Balance)                            Dr.

                           To Outstanding Interest on Bonds A/c

(Being Interest due for 5 months) (Note 2)  

$4876

$124

$5000

31-01-2018

Interest A/c                                                          Dr.

Outstanding Interest on Bonds A/c                 Dr.

Premium on Bonds (Balance)                           Dr.

                           To Bank A/c   

(Being interest paid on due date)

$975

$5000

$25

$6000

Working Notes :

= $100000 x 12% x 6/12 months

= $6000

Interest expense

= $117160 x 10% x 6/12 months

=5858

= $100000 x 12% x 5/12 months

= $ 5000

Interest expense

= ($117160-$142) x 10% x 5/12 months

=4876

= ($117160-$142) x 10% x 1/12 months

= $975

DATE

PARTICULAR

DEBIT

CREDIT

01-02-2018

Bank A/c                                                     Dr.

                           To Premium on Bond

                           To 12% Bond A/c

( Being 12% Bond Issued)

$117160

$17160

$100000

31-07-2018

Interest A/c                                                          Dr.

Premium on Bonds(Balance)                            Dr.

                           To Bank A/c

(Being Interest paid for half year)(Note 1)

$5858

$142

$6000

31-12-2018

Interest A/c                                                          Dr.

Premium on Bonds(Balance)                            Dr.

                           To Outstanding Interest on Bonds A/c

(Being Interest due for 5 months) (Note 2)  

$4876

$124

$5000

31-01-2018

Interest A/c                                                          Dr.

Outstanding Interest on Bonds A/c                 Dr.

Premium on Bonds (Balance)                           Dr.

                           To Bank A/c   

(Being interest paid on due date)

$975

$5000

$25

$6000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.