Exercise 10-21 Pharoah Company issued $457,500 9% 15-year bonds on December 31,

Question

Exercise 10-21 Pharoah Company issued $457,500 9% 15-year bonds on December 31, 2016, for $439,200 Interest is payable annually on December 31. Pharoah uses the straight-line method to an o tze bond premium or discount. Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds The payment of interest and the discount amortization on December 31, 2017 The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. (b) No. Date Account Titles and Explanation (a) Dec. 31, 2016 Debit Credit (b) Dec. 31, 2017 c) Dec. 31, 2031

Explanation / Answer

10-21) Journal entry :

Date accounts & explanation debit credit Dec 31,2016 Cash 439200 Discount on bonds payable 18300      Bonds payable 457500 (To record issue bonds payable) Dec 31,2017 Interest expense 42395      Discount on bonds payable (18300/15) 1220      Cash (457500*9%) 41175 (To record interest) Dec 31,2031 Bonds payable 457500     Cash 457500 (To record redemption)

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