Problem 10-11 Januar 1 2017 Pronqham Compan ss ed $1,020 000 ace value 7 10Year

Question

Problem 10-11 Januar 1 2017 Pronqham Compan ss ed $1,020 000 ace value 7 10Year bonds a s2 061 314 Tr s r ce rasulted n a 6% e ect e nte est rate onthe bonds. ronghorn aes the effective interest me od tú amortize bond premium er discount. The bonda pay annual interest on cach Januar Frepare the joumal entries to recond the following transsct ors. (Round ansivers t o decimal places, e.s. 12 5. Credit account t titles are automatically Indented hen amount is entered. Do not Indent manualty.J 1. The issuance of the bands on enuery 1,2017 2 Accrual of intereat and amortization af the premium on December 31, 2017 3. The poyment of nterest on January 1, 2013 Accrual of interest end amortization of the premium on December 31, 2010 No. Dete ccount Trtles and txplanation 1. Jan, 1, 2017 Debit Credit 2. Dec. 31, 2017 3. Jan. 1, 2018 4 Dec.31, 2018

Explanation / Answer

No. Date Account titles & Explanations Debit Credit 1 1/1/2017 Cash 2,061,314 premium on bonds 141,314 Bonds payable 1,920,000 2 12/31/2017 Interest expense (2061314*6%) 123679 premium on bonds 10721 interest payable (1920,000*7%) 134400 3 1/1/2018 interest payable 134400 cash 134400 4 12/31/2018 Interest expense (2061314-10721)*6% 123036 premium on bonds 11364 interest payable 134400 Balance Sheet(partial) As on December 31,2018 long term liabilities bonds payable 1920000 Add:premium on bonds 119,228 2039228 interest expense to be reported 123036 the bond interest expense reported in 2018 is less than the amount that would be reported if the straight line method of amortization is used Straight line amortization = 141314/10 14131.4

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